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Why should you buy a Flood Insurance?
Flooding is the one of the most common disasters recorded across U.S. The losses caused by flooding can be devastating and is not covered by the standard Homeowners or Renters Insurance policy. Just one inch of flooding water can cause damage around $25000. So, it's wise to consider buying Flood Insurance if you think you may be impacted by Flood.
Your mortgage lender may require you to buy flood insurance if your home is located in the flood zone or if it is a government backed mortgage like FHA or VA.
How does the Policy work?
Flood insurance policy can be bought as a separate policy and some of the policies have an option to add it as an endorsement for an additional fee. The policy has a period of 30 days to take into effect with few exceptions in scenarios like you need a policy to close or refinance on the property or the area is included recently in the high risk Flood zone in which case there is a waiting period of 1 day if bought within 13 months of the update.
You can refer FEMA ( Federal Emergency Management System) maps to locate your home and get an idea of what are the chances of flooding in your area. FEMA coordinates with the federal government to prepare, protect, prevent and provide relief for the natural disaster occurrence.
Types of flood insurance
Flood insurance policies are provided by NFIP (National Flood Insurance Program) and some private insurance companies. NFIP partners with around 50 insurance companies. The advantage with NFIP is there is no need to shop around for lowest rate as all the companies provide the same affordable rates according to the property's risk factor.
There is a Homeowners policy, Business owners policy and renters policy and the Coverage and the items covered under the policy varies accordingly.
What does it Cover?
The building and contents coverage varies according to the policy.
Homeowners Policy and Business owners Policy
Building Coverage
The homeowners policy covers electric and plumbing systems, permanent carpeting, Appliances in the kitchen, Foundation walls. solar equipment, water heater, furnaces etc
Contents coverage
Personal belongings such as clothes, furniture, equipment, valuable items up to $2500 etc
Coverage Limit
For residential properties, the coverage is up to $250,000 for the building and $100,000 for the contents of the building.
For commercial properties, the coverage is up to $500,000 for the building and $500,000 for the contents of the building.
The coverage limits depend on the amount of deductibles you pay, higher the deductible, the premium you pay is lower.
Renters Policy
Renters policy is a contents only coverage policy and does not include the building.
Contents Coverage
Clothes, electrical equipment, furniture, microwave oven, washer and dryer etc
Coverage Limit
For renters policy the contents coverage is up to $100,000.
What the Policy does not cover?
Sewer Backup
Insurance does not cover the sewer back up in the property if it is not resulted by flooding, the policy covers only if it is caused by flooding.
Overflow of appliance
If a damage is caused by overflow from the appliances, it is not considered flooding and hence it is not covered.
Temporary Housing Expense
If any damage is caused to your home because of flood and made your home inhabitable, the living expenses or temporary housing expenses are not covered by the flood insurance.
Cars or Other vehicles
Damage caused to Cars or other vehicles are not covered even if it is caused by flooding, in that case you may have to check with your Auto insurance for coverage.
Pipe Leakage
If there are any fault in the plumbing systems and there are damages caused by the leakage, those are not covered by the flood insurance. Any water damage caused by internal sources in your home are not covered under the flood insurance.
Floods can occur due to various reasons such as heavy rains, Hurricanes etc. Though some areas are prone to floods, it can happen anytime and anywhere. The cost of Flood insurance depends on various factors such as risk factor, age of the building, coverage limits of the building and contents, Property's elevation and the amount of deductible. Some private insurance policies may provide additional coverage limits.
In California, it is mandatory for a seller to give a Natural Hazard Disclosure (NHD) to the buyer while selling home if their home is located on a natural disasters like wildfires, floods, earthquakes prone area. The events and items covered by your insurance policy differs based on your policy and insurance provider. The conditions and limitations of the coverage vary upon your specific policy.