Does Insurance Cover Flood Damage? Understanding the Ins and Outs of Insurance and Flooding
Floods can cause extensive damage to your home or property. They can ruin personal items, destroy building materials, and leave a huge mess. When this happens, the biggest question is often does my insurance cover flood damage? Unfortunately, most standard homeowners insurance policies will not cover water damage caused by flooding. There is also a lot of misinformation floating around about flood insurance coverage. We look at your options for flood insurance as well as clear up some misconceptions.
Does My Homeowners Insurance Cover Flood Damage?
The short answer is no, your homeowners insurance policy will not cover flood damage in most circumstances. This has to do with how insurance works. Essentially, you are paying for protection in case something happens.
Your insurance company estimates the cost of repairs in your area and the likelihood something bad will happen. With some complicated math and historical data, they are able to make money and still cover damage if something happens.
However, in the case of a flood, the damage probably isn’t just affecting your property. A flood can damage you and your neighbors or even a large portion of your city. In order for your regular insurance company to cover widespread flooding, your premiums would be astronomical.
Flood Insurance Is Available
You may think you don’t need flood insurance or you’ve never had a flood before, but it’s still something you should consider. Flooding occurs in every part of the country, and 25% of all flood insurance claims come from areas best described as low to moderate risk. With very few exceptions, flood insurance is available throughout the country.
The National Flood Insurance Program (NFIP) was created in 1968 because so few private insurance companies were offering flood damage coverage for residential structures. The program provides federally funded insurance policies at additional premiums, with member communities agreeing to work towards reducing the flood risk in their area. Many homeowners in flood-prone areas are required to provide proof of flood insurance protection.
Flood insurance policies typically run around $700 per year but may be lower in low-risk areas. The average flood claim paid out last year was around $42,000 and coverage is provided for up to $250,000 for the home and $100,000 for possessions. Prices and coverage amounts will vary. Contact your insurance agent for details. In most instances, you can get flood insurance coverage for any home, apartment, condo, or business. If your community is a part of the NFIP, you can get flood insurance even if you’ve had a flood before.
The Problem With Relying on Federal Assistance Instead of Flood Insurance
Unfortunately, too many homeowners rely on federal disaster aid in the event of a serious flood. The problem here is that federal aid is only available if the area in question is considered a disaster area, and such aid is also provided in the form of low-interest loans that have to be paid back. Obviously, the preferred option should always be consistent insurance coverage for nominal premiums, as it cuts down on the governmental red tape.
Homeowners interested in joining the program should make sure their neighborhood participates in the NFIP. Then check with local insurance providers to see if they are licensed agents for the program. Failing that, government offices should be contacted in order to secure the proper coverage.