A flood is defined as a temporary condition of partial or complete inundation of normally dry land areas from overflow of inland or tidal waters, the unusual and rapid accumulation or run off of surface water from any source, or mudslides caused by flooding.
Flood damage is specifically excluded from all homeowner's policies. Homeowners is designed to bring your home and its contents back to the same financial condition it was before a loss, but flood insurance is meant only to get you back on your feet.
Flood insurance covers damage to a building, including the foundation, posts, pilings, piers, or other support systems for elevated buildings. It covers any direct physical losses caused by a flood or from flood-related erosion. This erosion may be caused by a flash flood, an abnormal tidal surge, or excessive waters resulting from a severe storm. Flood insurance also covers damage caused by mudslides.
The only guaranteed flood insurance coverage available for your home is Federal Flood Insurance purchased through your insurance agent or company.
Background
In 1968 the National Flood Insurance Program (NFIP) was established to provide property owners with the opportunity to purchase insurance protection for flood losses and to encourage communities to implement and enforce measures to reduce future flood risks in special flood hazard areas.
Flood insurance is a special policy financially backed by the federal government, with cooperation from local communities and insurance companies. Over 18,000 communities have created stricter zoning and building measures to control floods. Residents in these communities are entitled to purchase flood insurance through the National Flood Insurance Program, with the exception of property owners on certain coastal properties that are excluded from the program.
A community can protect its citizens against the high cost associated with flood disasters by encouraging construction practices that help reduce the impact on structural damages and limiting development in areas of high flood risk. Flood insurance is not available to residents of communities that do not participate in the NFIP.
Who Needs Flood Insurance?
Floods are four times more likely to occur than a fire. Floods can occur anywhere, even outside the identified flood plains. Flood insurance is a necessity for those who live in flood prone areas, especially those who live in high hazard flood areas.
Homeowners who live in hazard flood areas should consider purchasing flood insurance. Beachfront structures account for only 3% of all flood losses. Those living in high hazard flood areas have a 26% chance of having a flood over the course of a 30-year mortgage. Of the 10 million households in high hazard areas, only about 25% are covered by flood insurance.
Low hazard areas are also at risk -- 35% of all claims each year are paid for property located outside high-risk areas. Discounted rates are available for homes located in low hazard areas. A number of private insurance companies participate in selling and servicing the NFIP for the federal government.
Buying Flood Insurance
Flood insurance picks up where your homeowners insurance leaves off. The average flood policy premium is $350 annually; homeowners in low risk zones can often obtain flood insurance at a much lower rate. Although flood insurance is relatively inexpensive, many Americans are unprotected against flood loss.
There are three different types of flood insurance policies depending on the type of building to be insured. Single family and multi-family homes fall under the "Dwelling" policy. Apartments and businesses fall under the "General Property" policy. Condominiums fall under the "Residential Condominium Building Association Policy" (RCBAP). The difference in these types of policies lies in the amount of coverage for which one can be insured. Policyholders need to ask for a contents provision to be added to the policy. The deductible for buildings and contents are applied separately. Residential buildings can only receive $250,000 in coverage; non-residential buildings only receive $500,000. Contents within the home are also limited up to $100,000 for residential ($500,000 for non-residential) locations.
Exclusions
Buildings located entirely over water (boathouses)
Structures other than buildings (fences, retaining walls, underground structures
Walkways, decks, driveways, patios
Flood insurance provides limited coverage for basements and other enclosed areas beneath the lowest floor. Coverage is available for equipment necessary to the habitability of the building such as utility connections, sump pumps, well water tanks and pumps, fuel or water tanks, furnaces, washers and dryers, food freezers, an air conditioners. Clean up expenses are also covered for basement drywall (unpainted), sheet rock, walls (insulation) and ceilings are not covered.
