Federal officials say flooding is the leading cause of property loss from natural disasters in the United States. Yet even though flood insurance is relatively inexpensive and policyholders can collect for flood damage without an official disaster declaration, many go without coverage.
Special disaster insurance, offered through local insurance agents or directly from the government-run National Flood Insurance Program, is not available everywhere. But if it is available where you live or own a business and there’s a risk of flooding, buying coverage is a prudent way to manage your risk.
Flood insurance is available in communities that adopt and enforce what the federal government considers sound floodplain management practices.
To find out whether your community participates in the flood insurance program, contact your local government or call the flood insurance program’s toll-free telephone number, (800) 427-4661.
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Act Before You Need It
The most prudent course of action, of course, is not to live in a flood zone. Some people think that if there has been no flooding for 10 years or 50 years, they’re safe. But in a floodplain, sooner or later the waters will rise. That’s why it’s called a floodplain.
Living elsewhere, however, might not be an option. For instance, consider fast-growing coastal areas. In these locations, it’s wise to hedge your bets long before a hurricane or major coastal storm is on the way. That’s because there is usually a 30-day waiting period after enrolling before coverage of property and personal possessions takes effect.
But a real flood — a river that flows over its banks and covers acre upon acre of land, or storm waves that surge over the coastline — usually won’t be covered by traditional insurance policies. That’s where flood insurance, bought in addition to homeowners or property-owners insurance, kicks in.
Licensed property and casualty insurance companies do sell and service flood insurance, but the policy and coverage come from the federal program. No matter how or from which insurance company you buy flood insurance, you’ll get the same federal policy.
If there’s a flood, contact the agent from whom you bought the flood insurance. That agent will put you in touch with a claims agent who will inspect the damage.
Can I Insure It?
Two Types of Flood Insurance
One of the most important things you should take note of is the two kinds of flood insurance you can purchase. Each of them is very different in the coverage they give and how much they are going to cost. The two kinds are NFIP flood insurance and insurance from private insurance companies.
There are several advantages and disadvantages to these two types, which we will look at later in this article.
What’s important is your home has the protection you deserve, and there are two areas of coverage you’ll need, building property coverage and personal property coverage. Here is the difference:
- Building Property Coverage – This is the protection that will pay for repairs to your actual home and its foundation. Building property coverage also protects your kitchen appliances, plumbing, electrical, carpet, water heaters, and much more.
- Personal Property Coverage – As you can probably guess from the name, this is the portion of insurance that pays for all of your clothing, furniture, washers and dryers, food, jewelry, and much more.
Costs Vary by Location
There are two ways that you can buy a flood insurance policy, either through a private insurance company or through the federal government.
You can purchase one of these plans from any of the handful of insurance companies that sell them. The price of your plan is going to depend on a variety of different factors. Your plan could be anywhere from $100 a year to over $1,200 a year depending on how high of a risk your home is.
The cost of flood insurance depends on the location of your property. Where available, flood insurance can be a good buy, especially considering the cost of replacing flood-damaged uninsured property and personal effects. Most flood victims who apply for assistance from FEMA (Federal Emergency Management Agency) to repair their homes and businesses receive help in the form of low-interest loans administered by the SBA (U.S. Small Business Administration).
Flood insurance premiums are generally far lower than the payments for a disaster loan. Be aware, however, that Congress is considering overhauling the NFIP, which could result in higher premiums for some homeowners.
The federal government’s program fixes premiums for the entire country based primarily on a home’s location and elevation.
Private Flood Insurance vs National Flood Insurance Program (NFIP)
When you’re shopping for flood insurance, you can choose between either the National Flood Insurance Program (NFIP) or a private insurance plan. There have been a few more companies that have decided to start selling flood insurance, and it can be difficult to decide which plan is going to be best for you and your house.
One reason homeowners choose a private insurance company is because of the higher coverage limit. Private insurance plans will give you protection of $250,000 or even more. Not only can you get more flood insurance protection, but in some cases, the premiums are going to be lower with a private insurance company compared to what you would pay with the NFIP.
Another benefit of using a private insurance plan is your basement will be protected. NFIP does not cover any flooding damage that is below ground on all sides. Additionally, it won’t pay for any damages to anything outside of your home or damage from mildew or mold that could have been prevented.
On the other hand, the NFIP insurance plan has a couple of advantages that make it a popular choice. The main benefit of the NFIP is that flood insurance coverage is broader than a private insurance plan. Private insurance plans have several loopholes and areas they don’t protect, which means you could be left footing some of the repair bills yourself.
Comparing Private Flood Insurance and National Flood Insurance Program (NFIP)
|Aspect||Private Flood Insurance||National Flood Insurance Program (NFIP)|
|Coverage Limit||$250,000 or More||Limited Coverage Options|
|Premiums||Potentially Lower Premiums||Typically Standardized Premiums|
|Basement Coverage||Included||Excluded for Flooding Below Ground|
|Exterior & Mold/Mildew Damage||Covered||Limited or Not Covered|
|Coverage Breadth||Varied, Potential Gaps||Comprehensive and Fewer Coverage Gaps|
In addition to flood damage coverage, you’ll get:
- Eligibility for secured financing to buy, build, or improve structures in a special flood hazard area. Federally regulated or insured lending institutions require flood insurance coverage before they grant secured financing.
- Reduced risk of flooding. If buildings substantially damaged by flooding are rebuilt to new flood insurance construction standards, they have less risk of damage from future flooding and are eligible for flood insurance coverage at a reduced rate.
You can find out if your property is in a flood zone by calling the municipal planning or zoning department in your community. If you’re in a flood zone, you’ll need to arrange for a professional survey of your property showing its location and elevation.
People who receive some form of federal flood disaster assistance are required to purchase flood insurance if they live in a government-designated special flood hazard area. Federal law requires people who receive SBA disaster loans, or an individual and family grant, to buy and maintain flood insurance as a condition of receiving assistance.
Uninsured repeat victims may be ineligible for assistance in the future.
Flood insurance coverage is available for residential and nonresidential buildings, as well as for contents. Homeowners who carry flood insurance are covered for any flood-related damage to the ground level or upper floors of their homes.
Flood damage to personal belongings is covered only if the policyholder has bought contents coverage. Coverage for flood damage to basements is limited to structural elements and basic items used to service the building, such as furnaces, water heaters, and utility connections. If you have a home business, a separate policy is necessary to cover structural or content damage.
Points to Remember
- Flood insurance is available in communities registered under the Federal Emergency Management Agency’s National Flood Insurance Program (NFIP). To find out if your community is part of the program, call (800) 427-4661.
- Don’t hesitate to purchase flood insurance. Policies usually have a 30-day waiting period before they go into effect.
- Costs for the insurance will vary based on your community and the insured property’s proximity to areas prone to flooding.
- People who receive some form of federal flood disaster assistance are required to purchase flood insurance if they live in a government-designated special flood hazard area. Failure to buy the insurance can result in ineligibility for future claims.
- Separate policies are needed to cover personal belongings and the contents of basements.
For More Information
For general NFIP information or inquiries about laws, regulations, or administrative policies, write to:
Federal Emergency Management Agency
To order Flood Insurance Rate Maps or for information on Flood Insurance Studies, call the FEMA Map Service Center at (800) 358-9616 or visit www.fema.gov.fhm