What Is Flood Insurance?
Flood insurance is the only type of coverage that can pay for damage to a home caused by storm surges. While standard home insurance policy can cover water damage from a burst pipe, it does not pay for flood damage caused by hurricanes and other natural disasters.
And the need for flood insurance is real. Consider this: even one inch of standing water costs $23,635 in repairs to a one-story home. This figure doesn’t take into account the additional costs of replacing flood-damaged personal property.
Yet only 42 percent of homeowners in Florida’s coastal counties have flood insurance. Even fewer homes that were in the path of Hurricane Harvey in Texas have flood insurance: only 15 percent of homes in Harris Country and only 20 percent of homes in Nueces County (home to Corpus Christie) are insured for flood damage.
But it’s not just coastal homeowners who need this protection. About 20 to 25 percent of flood claims are paid in areas considered low risk for floods.
What Does Flood Insurance Cover?
Flood insurance can cover water damage to your home and your belongings. Specifically, it allows you to make a claim if the following items are subjected to storm surges:
- Electrical, heating, cooling, and plumbing systems.
- Appliances, including refrigerators, stoves, washers, and dryers.
- Carpeting and window treatments.
- Built-in bookcases, cabinets, and paneling.
- Foundation, walls, anchorage systems, and staircases attached to the structure.
- A detached garage.
- Personal property, including clothing, furniture, and electronic equipment that isn’t stored in the basement.
- Valuables, like artwork and furs, up to $2,500 in value.
Flood policies also offer coverage for groundwater seepage, mudslides, and floods caused by broken water mains.
Both the home and personal property are insured for their replacement cost with the following maximum coverage limits:
- $250,000 for the dwelling.
- $100,000 for personal property.
You can learn more about how flood insurance claims are paid out here.
What Flood Insurance Usually Doesn’t Cover
Flood insurance can’t cover everything, though, and typically excludes coverage for the following:
- Moisture or mold/mildew damage that the homeowner could’ve prevented.
- Currency, precious metals, and paper valuables.
- Outdoor property, including landscaping, patios, fences, decks, septic systems, and pools.
- Additional living expenses when a flood makes the home uninhabitable.
- Cars and other vehicles.
- Earthquakes and earth movements caused by floods.
Flood insurance also usually won’t cover water damage to personal belongings in basements and crawl spaces.
Are You Required to Have Flood Insurance?
That depends on where you live and what your mortgage situation is like. For example, if your home is in a high-risk flood zone or Special Flood Hazard Areas (SFHAs) – locations with 25 percent chance of being flooded within 30 years – and you have a mortgage through a federally regulated lender, that lender is legally obligated to require you to have flood insurance. Many mortgage lenders require flood insurance if your home is near a body of water, regardless of their legal mandate to do so.
But if you don’t have a mortgage, you aren’t required to buy flood insurance. That said, it is incredibly risky not to, especially if your home is in an area prone to flooding, such as the Florida panhandle, along the Gulf of Mexico and the Atlantic Coast, along the Mississippi River, or even near the Rockies.
It’s also worth remembering that up to 25 percent of all flood claims come from low to moderate-risk flood areas. That’s why even if you aren’t required to have flood insurance in these areas, it’s still a wise investment.
Some home insurance providers may require you to have flood insurance as a condition of issuing a standard home insurance policy, too.
How Much Flood Insurance Do You Need?
If you have a mortgage, you’ll usually be required to have flood insurance equal to the cost of developing your property or up to the maximum coverage limit available – whichever is lower.
Another useful benchmark is to have coverage equal the value of your home and belongings. Your insurance provider can help you determine what makes sense for your needs.
When Should Homeowners Buy Flood Insurance?
Flood insurance is offered through both the National Flood Insurance Program and private insurers. With either option, be aware that most flood policies don’t take effect until 30 days after purchase.
That’s why you should consider purchasing flood insurance well before flood and hurricane seasons begin.
How Much Does Flood Insurance Cost?
The cost of flood insurance varies drastically depending on where your home is located, its elevation, and the deductible and coverage limits you choose.
In low-risk areas, flood premiums may be as little as $500. Premiums in high-risk areas may cost much more. For reference, the average annual federal flood insurance premium is $935 as of 2018.