In the event of a flood that occurs in your area, having flood insurance can make all the difference in the world, in terms of how you survive the event financially.
Any home can become flooded, and flood damage is not already covered under most homeowner’s insurance policies.
Since flood insurance is not typically included in any homeowner’s insurance, you’ll generally have to arrange for this kind of coverage as an add-on or ancillary policy.
What is Flood Insurance?
When a flood occurs in your area, chances are there will be damage that occurs to your building, and possibly to the contents of that building as well.
If you didn’t have flood insurance, you would be obliged to pay for all that damage yourself, and to replace any belongings that were ruined by the floodwaters.
By purchasing flood insurance, you can be protected against financial catastrophe, because the insurance company will pay for those damages instead of you having to pay out-of-pocket.
What Can It Cover?
Included in your flood insurance coverage will be your:
- furnace and water heater
- electrical and plumbing systems
- all appliances
- permanently installed carpeting
- separate garages
- well water tanks
- sump pumps
- all solar power generating equipment
As you can see, virtually everything inside your premises will be covered by a good flood insurance policy.
The average cost of flood insurance varies, as does what it can cover.
For example, on a $100,000 home, it may be between $350-400 per year. However in a low to moderate risk area, a similar policy might average $100 to $125.
What Does It Not Cover?
When it comes to things that aren’t covered by flood insurance, it becomes necessary to consider the cause of the flooding.
For insurance purposes, flooding is considered to be an event that affects a land area of at least two acres, and which is dry under normal circumstances.
As an example, if your sewer were to suddenly back up one day, you would have coverage if the sewer backed up as a direct result of flooding which had occurred. If there was no flooding involved, your backed-up sewer damage would not be covered.
The same principle applies to any other situation involving floods – if the damage was caused as a direct result of the flooding, you’re covered, otherwise you’re not.
Are there policy limitations?
The rule of thumb on policy limits for flood insurance is you will be reimbursed for up to $250,000 on the home itself, and up to $100,000 on its contents.
Insurance companies arrive at these figures assuming it would be necessary to demolish the home, remove all debris, and rebuild the home.
As you might guess, this can quickly exceed the limits of the policy, unless you realize your home is more expensive, and purchase a higher-end insurance policy to cover those same costs for a more expensive home.
Federal disaster assistance may be available to flood victims if the US President declares an area to be a Federal Disaster Area. Generally, a small percentage of floods are ever declared Federal Disasters.
Also, if you are not insured and receive federal assistance following a flood, you may be required to purchase flood insurance in order to qualify for any future disaster relief benefits.