If you don’t live in a flood plain, you may not have considered buying flood insurance for your home or business. However, for many owners and renters, purchasing flood insurance is a good idea, especially since the typical renter’s and homeowner’s insurance policies don’t cover most types of flood damage. Below, you’ll find an in-depth explanation of when flood insurance is required, what it covers, and the responsibilities of the insurance provider.
Am I Required to Have Flood Insurance?
Not everyone is required to have flood insurance. However, if you have a federally regulated mortgage and live in a high-risk flood area known as a Special Flood Hazard Area (SFHA), the Flood Disaster Protection Act of 1973 does require you to obtain it. Additionally, lenders and landlords may insist that you purchase flood insurance as a prerequisite to your loan or lease.
However, flood insurance is worth considering even if you’re not required to have it. Normal home insurance policies only cover water damage that originates inside your home, like that from a burst or leaking pipe. It won’t cover you for flooding caused by a river overflowing, mudslides, or many other types of flood damage.
The National Flood Insurance Program
The National Flood Insurance Program (NFIP) was created by Congress to provide affordable flood insurance to property owners, and to help mitigate flood devastation through local preventative measures. If a given community agrees to adopt and enforce ordinances to manage its flood risks, the federal government will agree to provide flood insurance to the members of that community who qualify for coverage. The NFIP is administered by the Federal Emergency Management Agency (FEMA) under the Department of Homeland Security.
What Does Flood Insurance Cover?
Even though it’s called “flood insurance,” it doesn’t necessarily cover all types of flood damage, and it depends on what type of policy you choose. You can select coverage for your actual property (i.e. the building), your personal property (like furniture), or both.
The typical property policy includes coverage up to $250,000 ($500,000 for commercial buildings) for the following:
- Your home and its foundation
- Electrical and plumbing systems
- HVAC equipment
- Kitchen appliances
- Other permanently installed fixtures
And the standard personal property policy includes the following coverage, up to $100,000 ($500,000 for commercial):
- Freezers and the food in them
- Valuables (subject to policy limits)
It’s also important to note things that are not usually included in a standard flood insurance policy, such as:
- Valuable papers like stock certificates
- Property outside your home, including pools, hot tubs, fences, and decks
- Temporary accommodations while your home is under repair
What’s Considered a Flood?
Under the standard policy, a flood is “a general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties (at least one of which is your property) from overflow of inland or tidal waters, from unusual and rapid accumulation or runoff of surface waters from any source, or from mudflow.” Wind-driven rain and hail damage are not covered by typical flood insurance policies.
Responsibilities of the Insurance Company
Flood insurance – even if you obtain it through the NFIP – is handled by private insurance companies. In exchange for the premiums you pay, your insurance company agrees to pay for specified losses, up to the policy limits on your plan. After flood damage occurs, you should contact your insurance company immediately and file a claim. The insurance agent will assign your claim to an adjuster who should assist you with the claims process and determine the value of damaged property and the cost of repairs.
If you believe your insurance company is refusing to cover your legitimate claim or otherwise failing to cooperate under the terms of your insurance policy, you have a number of options. You can try to sue the company in a breach of contract lawsuit or file a suit claiming they’ve acted in bad faith. You can also contact your state’s department of insurance, which enforces state law regarding the insurance industry.
Protecting Your Rights After a Flood
The physical damage and emotional turmoil caused by a flood can be overwhelming. Understanding what your policy covers, as well as your rights and obligations can also be complex. If you’re having issues with your flood insurance, don’t fight that battle alone. To protect your interests and recuperate your losses after a flood, contact a local insurance attorney familiar with flood insurance laws and regulations.