Does Your Homeowners Insurance Policy Protect You From Flood Damage?
Rain is a beautiful thing, especially in areas plagued by drought. But when rain turns into flooding, and leads to damage to homes, it’s not such a beautiful thing.
Flood Insurance Basics
Many homeowners learn the unfortunate lesson that their homeowners insurance policy doesn’t protect their home or prized belongings in their home from the devastation left by the wrath of a flood.
Flood insurance is administered by the Federal Emergency Management Agency (FEMA) through the National Flood Insurance Program (NFIP). While it is not included in a standard homeowner’s insurance policy, homeowners typically purchase flood insurance coverage through local insurance agencies.
The NFIP allows residents in certain communities to purchase federally backed flood insurance coverage for homes that would otherwise fail to qualify for flood insurance due to the high risk nature of these policies.
Who Needs Flood Insurance?
Most homes located in areas that are labeled as high risk areas for flooding, including coastal regions that are susceptible to high tide and storm surge, as well as those located on or near rivers that are known to flood, must carry flood insurance for the duration of mortgages at minimum.
People in these moderate and high risk locations are strongly encouraged to have this coverage for the structure and for the contents of their homes regardless of mortgage status.
Everyone needs flood insurance protection, though. “More than 20 percent of flood insurance claims come from outside high-flood risk areas,” according to FloodSmart, a government website that educates consumers about floods, flood insurance, and flood risks,
The Tricky Thing about Flood Insurance
In most situations, there is a 30-day waiting period between the time flood insurance is purchased and when claims can occur. In other words, you can’t wait until a hurricane is winding its way up the Eastern seaboard – or the first signs of a major thaw – before you purchase flood insurance and have coverage for the event. You have to plan ahead when purchasing flood insurance coverage.
The one exception to this rule comes when lenders require you to have flood insurance because you’re either purchasing a new home or refinancing your home. In these instances, flood insurance is necessary in order to close the sale and is valid immediately.
What Causes Floods?
Flooding occurs for a wide variety of reasons. Since we know that over 20 percent of the homes that experience flooding are in areas that aren’t designated as high risk, it’s important to understand the many different causes so that you can plan ahead when purchasing a home and making decisions about your insurance policy purchases. These are a few common reasons homes flood:
- Dams burst
- Levees break
- Rivers overflow
- Storm surge
- Spring Thaw
- Snow melting after significant storms
- Blocked drains
- Rain events
The telling thing, though, is that you don’t have to live near the ocean in order to be at risk for flooding. In fact, there are very few places in New Jersey that don’t have some degree of flooding risk.
Facts You Need to Know about Flood Insurance
Before you buy your flood insurance policy, there are a few things you need to understand in order to make informed decisions about whether flood insurance is the right choice for you and even how you should configure your home in order to maximize your flood coverage.
First, because each household situation, value, location, and circumstance is difference, the cost of premiums for flood insurance vary greatly from one home to the next.
Second, there are definite limits to the coverage and protection federally backed flood insurance policies afford. The Insurance Information Institute explains that the maximum coverage for the structure of the home is $250,000 and the maximum coverage for personal possessions is $100,000. You can choose to purchase excess flood insurance to cover amounts over $250,000 and up to the flood coverage amount you need to protect your home.
Third, basement improvements, like finished walls, flooring, and even finished ceilings are not covered by FNIP. Most items and furniture in your basement are excluded from flood insurance coverage. Some things in your basement, though, such as your furnace, hot water heater, etc. are covered under your flood insurance policy.
Fourth, small floods may not be covered by your flood insurance. In order to quality the affected area must be larger than two acres or must affect at least one other property.
Fifth, flood insurance does not extend to alternative living expenses or business interruption coverage for businesses affected by floods. This means you’re on your own for living arrangements while repairs are being made.
Sixth, obtaining an elevation certificate for the property can help reduce the costs of flood insurance premiums.
Finally, NFIP flood insurance offers replacement value for the structure of your home, up to the $250,000 limit, but only offers actual cash value (which subtracts depreciation from replacement costs) of the possessions inside your home.
Don’t wonder if your homeowner’s insurance policy is providing you the coverage you need to protect your home from the devastation floodwaters leave behind. Contact The Insurance Center of New Jersey today at 201.525.1100 and let us help you sort out the details so you can get the insurance protection you need.