For those who feel they are immune to rising waters, think again. In the last 5 years, all 50 states have experience floods or flash floods. The often overlooked insurance product, could be one of the most important purchases a homeowner ever makes. That’s because nearly all homeowners policies fail to cover losses incurred by flooding to your home.
Due to the financial crisis, a lot of Americans are underwater on their mortgage. Without flood insurance, their homes will literally be underwater with no relief in sight to cover the losses. It is important to remember that all policies are different and the burden is on the homeowner to know what is and isn’t covered.
However, this information provides a basic understanding of how flood insurance works, how it differs from other coverage, and what is covered if your home is affected.
What Does a Standard Homeowner Insurance Policy Cover?
Homeowners insurance only covers you when water damage is considered to have occurred before the water comes in contact with the ground. Basically stating that you are only covered if the water originated from a source other than ground. Some Examples of such occurrences:
1. A broken water pipe (which is why you need to always let your pipes drip when temperatures approach freezing)
2. A hail storm that creates an opening in your home and allows water to pass through
3. Heavy rains that seep through your roof and enter your home
What Does a Standard Flood Insurance Policy Cover?
Flood insurance primary function is to pick up where your conventional homeowners insurance leaves off. They work great in tandem and when coupled together a homeowner can rest easy knowing their home is protected from most water related damages. Some examples of when a flood insurance policy will kick in:
1. A nearby body of water overflows and results in your home being flooded
2. A heavy rain saturates the soil around your home and the water seeps into your basement
3. A heavy rain or flood causes a hill to collapse resulting in a mudslide that damages your home.
Where Can I Purchase Flood Insurance and What Does it Cover?
There are two main properties when discussing what is covered in the event of a flood: Building Property and Personal Content Property. You can purchase one or both of these coverages when selecting insurance but it is important to remember the distinction. For a full list of what falls into a specific category, it is recommended you speak to a licensed insurance agent
There are also two ways to come about buying flood insurance. You may be eligible for The National Flood Insurance Program (NFIP), which is a government issued flood insurance. It was created in 1968 to help homeowners in flood zones who before were left on their own.
While premiums for the program had been traditionally well below market value, the Flood Insurance Reform Act in 2012 has risen premiums with the intent to make the NFIP “more sustainable and financially sound over the long term.” Since the NFIP’s rates are more in line with private flood insurance, homeowners have sought coverage from this sector as well.
Even those covered by the NFIP have sought out excess coverage from private companies to pick up where the NFIP’s limits stop. Common limits for more flood insurance policies are around $250,000. So if your home is worth considerably more than this amount, one can see the benefits to purchasing excess coverage from a privately up to the value of their home.
Other Products That Offer Great Benefits.
In areas of the country where hurricanes present a danger, it would be wise to look into hurricane insurance as well as the above the products. There have been numerous cases in recent years where hurricane victims were blindsided to learn they were not insured for the damages left in the wake of the storm. Hurricane insurance primarily covers damage caused by wind to the home.
This presents a very complex and argument after a storm hits as to what actually caused the damage to your home. If your home is washed away by the storm surge resulting from a hurricane you are covered under your flood insurance. If it’s determined the high winds blew your home off it’s foundation you aren’t covered by either your homeowners or flood insurance policy.
This is why anyone living in these area’s needs to know all the details of their policies and package them in a way that protects them from the financial and personal crisis left in the wake of a storm or other harmful event.
Today’s post was provided by Brian Levesque, a Florida native who is no stranger to a little rain and the importance of flood insurance. When Brian isn’t battling out an afternoon thunderstorm, he serves as a professional writer for InsuranceLand.org.