When Do You Need Flood Insurance?

March 16, 2015

Most people don’t think they’re at risk for flooding in their area.  After all, if you don’t live below sea level, what are the chances? Turns out those chances may be higher than you think.  Flood risk depends as much on rain or snowfall in your area as it does on geography.  Obviously, you’re not at high risk for flood damage if you live on a mountain, but you might want to assess your risk of flood damage and purchase insurance just in case.

Because flood insurance doesn’t come with standard home insurance plans, there is a federal flood insurance provider.  The National Flood Insurance Program (NFIP) is administered by FEMA, and can be purchased through property and casualty insurance agents.  NFIP rates are set at the federal level and do not change no matter which agent or company you purchase it through.  Your rates will depend on a series of factors, such as the age or location of your home.  Even if you live in a high-risk area, if your community participates in NFIP, you can not be denied flood insurance.  You must wait 30 days for your policy to take effect, however, so be sure to protect yourself far in advance of any flood risk.

Are you at risk of flooding?

Flood risk is different depending on which part of the country you live in.  There’s a pretty cool (and fairly sobering) Google Maps view of flood risk, and FEMA has released a Google Earth layer that allows you to see the data for your area.  Many localities also offer specific flood risk information for that area.  Check with a local agent if you need more information.

What does flood insurance cover?

If you have a standard [homeowner’s insurance] policy, your property may be covered from water damage, but it depends on where the water came from and how it got into your house. A flood is defined, for insurance purposes, as water that rises past where it should be and into your house.  That means an existing body of water that overflows, a heavy rain that seeps into your basement because the soil around your home can’t hold all the water, or a mudslide that creeps into your home all qualify as “floods” for the purpose of flood insurance.

The only insurance that will cover flood damage is a policy specifically for flood risk.  Any other policy that shields you from liability for water damage will not apply to this type of natural disaster.

What doesn’t flood insurance cover?

The key to distinguishing between what is covered by flood insurance and homeowner’s insurance lies in the source of the water.  Water that came in contact with the ground and then rose or seeped into your house is a flood; all other water is just plain old water.

Your home insurance policy will cover your home and property from other types of water damage, including rain that seeped in through the roof or got in through a hole in a window caused by the storm; or a broken water pipe that sprayed water all over your house.

If your homeowner’s insurance covers you against damage or theft, you may still be covered from consequential damage due to a flood. For example, if a flood causes you to evacuate your home, your homeowner’s policy will cover you against any theft or vandalism that occurs while you aren’t living there.

Changes in flood insurance requirements

In 2012, Congress signed into law the Biggert-Waters Flood Insurance Reform Act of 2012, which may affect how much you’ll pay for flood insurance.  Some people will see their premiums rise if they are in a flood-prone area.  This is an attempt to bring premiums more in line with the actual cost of damage caused by flooding.  Of the ten costliest hurricanes in history, eight of them have occurred since the turn of the century.  People in high flood risk areas will be expected to pay higher premiums under the Biggert-Waters act than those in less flood-prone areas.

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