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How Does Flood Insurance Work?

Brian Robson

Brian Robson

Insurance and Finance Ronin

6 min. read

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As you might expect, flood insurance is designed to help provide insurance coverage for damages resulting from a major flood. It differs in many ways from standard homeowners insurance because, while some homeowners insurance policies might pay for water damage due to burst pipes, flood insurance is meant for damages several magnitudes larger than a dripping pipe. This can include things that might exceed your homeowners insurance, such as damaged foundations and debris removal.

What Does Flood Insurance Actually Cover?

Despite it being a coverage for your home, flood insurance is generally not included in any homeowners insurance policies. In fact, flood insurance needs to be purchased separately through the federal government’s National Flood Insurance Program (NFIP). As a result, there are some distinctions as to what flood insurance will cover versus your standard homeowners insurance policy.

Property coverage – Up to $250,000

Recovering from a flood can be an exhaustive and expensive undertaking. In fact, just one inch of flooding in a single-level 2,500 sq. ft. home can cause as much as $26,807 worth of damages. Flood insurance takes these massive costs into consideration and helps cover the following:

  • Home’s foundation
  • Utilities (electrical and plumbing systems)
  • HVAC (central heating and air conditioning, furnaces, water heaters, etc.)
  • Detached garage
  • Attached bookcases
  • Cabinets
  • Window blinds
  • Permanent carpeting
  • Permanent drywall and paneling
  • Kitchen appliances (refrigerator, stove, dishwasher, etc.)
  • Debris removal

Personal possessions coverage – Up to $100,000

Flood insurance also helps cover your personal possessions. The amount paid, however, is the present-day cash value, not what you paid for them. Furthermore, depreciation is taken into account when determining the total cost of your damaged or lost valuables.

The list of personal items covered can vary, but here are some examples:

  • Clothing
  • Electronics
  • Curtains
  • Portable appliances (window AC units, microwaves, etc.)
  • Valuable art pieces, furs, and certain other luxuries (usually limited to $2,500 in value)

What Isn’t Covered by Flood Insurance?

There are quite a few things that flood insurance will not cover. (Although, like cars and boats, these tend to fall under the umbrella of other comprehensive insurance types). Here are some other examples of what flood insurance will NOT cover:

  • Mold (pre- or post-flood)
  • Fences
  • Trees
  • Plants
  • Wells
  • Septic systems
  • Walkways
  • Decks
  • Patios
  • Seawalls
  • Hot tubs
  • Swimming pools
  • Currency
  • Precious metals
  • Stock certificates and other valuable paperwork

Flood insurance also will not cover any financial hiccups resulting from the flood. These can include:

  • Financial losses caused by business interruption
  • Loss of use of insured property
  • Living expenses for temporary housing

Do I Need Flood Insurance?

According to the non-profit Union of Concerned Scientists, chronic inundation threatens more than 100,000 of today’s coastal homes. Based on these findings and using data from the National Oceanic and Atmospheric Administration (NOAA), researchers found that the following 14 states were poised to face $1 billion worth of property damage by 2030:

  • New Jersey
  • California
  • Florida
  • New York
  • South Carolina
  • Louisiana
  • Massachusetts
  • Maryland
  • Connecticut
  • North Carolina
  • Washington
  • Georgia
  • Alabama
  • Texas

When determining if you need flood insurance, start by taking your surroundings into account (especially if you live in any of those flagged states). That said, while it’s true that some areas might be more prone to flooding than others, floods can happen anywhere that experiences heavy rains, earthquakes, hurricanes, landslides, beaver dams, or spring thaws. In addition to considering your likelihood of experiencing a flood, it’s important to ask yourself whether or not you could afford to repair or replace your home in the event of flood damage.

Where Can I Find Flood Insurance?

You can get flood insurance through the federal government’s National Flood Insurance Program. However, it’s not as easy as buying an insurance policy directly from the government. Instead you’ll either need to contact the NFIP Referral Call Center at (888) 379-9531 or go through an agent or insurer participating in the NFIP.

Once you have an agent or have been referred to one, you can sign up — but remember that it takes 30 days after signing for a flood insurance policy to kick in. And unlike other insurance policies you might find, flood insurance does not renew automatically. Typically, your insurer will send you a reminder and you will need to contact them to arrange payment to renew your policy.

Make sure you’re comfortable with the agent or insurer that you’re working with. When it comes time to file a claim, it won’t be the government that handles your claim, it will be your agent. Take some time to shop around and compare different insurers, specifically on things like agent courtesy, ease of claims process, and turnaround on claims payments.

We cover a lot of this in our review of the nation’s best homeowners insurance (and many of our top picks participate in the NFIP). We also go into deeper detail about working with your agent in our guide on What to Do in the Event of a Flood.

Don’t Wait for a Disaster to Strike

The frequency of high-tide flooding has doubled in 30 years. As sea levels continue to rise, instances of coastal flooding are becoming more frequent. If you live near a body of water or believe you might be at risk, don’t wait for disaster to strike before getting flood insurance.

And remember that just because you aren’t in a high-risk area doesn’t mean you’re safe from flooding. In fact, 25-30% of the flood claims paid by the NFIP are for properties outside of high-risk flood areas.

What’s Next?

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