If you need (or want) flood insurance you’ll likely need to purchase it separately from your homeowner’s insurance.
While some insurers will add a rider to your homeowner’s policy (if you request it) to cover damages in the event of a flood, most people who need flood insurance go through the National Flood Insurance Program (NFIP) to obtain coverage for flood damages.
History of the NFIP
As part of the Federal Emergency Management Association (FEMA) The National Flood Insurance Program was created in 1968 as a means of addressing the lack of flood damage coverage being offered by insurers in the market.
It was also created to reduce the need for federal disaster assistance to cover uninsured flood losses.
While this sounds great – and it is – like anything in life, there are some caveats you should be aware of:
1. Coverage
The NFIP will cover damages to your home in an amount up to $250,000 dollars. Your personal property is covered up to $100,000 dollars.
Note: To have both personal property and your home covered you’ll need to buy two policies; they’re not combined.
If your home and/or personal property is valued above these amounts you will have to either purchase flood insurance separately or take a risk that you won’t be flooded out and pay for any damages yourself out of pocket.
2. You may be required to purchase it
If your home is situated in what’s called a “Special Hazard Flood Area”) and you need a mortgage, your lender will require you to buy…and maintain…a flood insurance policy to obtain financing.
Even if you aren’t required to purchase it and you want to explore your options visit the FEMA website. You can see if your home is in a flood zone and/or if your community participates in the program. You’ll also find information on obtaining a policy for your home.
3. Your coverage won’t be exhaustive
While having flood insurance is the closest thing you can find to having a ‘fairy godmother’ to make everything better after a flood, it’s not perfect.
There are limits to what is covered, so it’s important to understand these limits so that you’re not shocked should your home ever be flooded out.
Note: Flood insurance will cover either the cost to rebuild your home or the actual cost of your home, whichever is lower.
Items generally covered:
- ⬥ Your home itself – including the foundation
- ⬥ Electrical and plumbing systems including HVAC equipment such as furnaces, water heaters and air conditioners
- ⬥ Kitchen appliances (stove, refrigerator built-ins such as a dishwasher)
- ⬥ Carpet that’s been permanently installed (a/k/a not throw rugs)
- ⬥ Wallboard, panelling, bookcases and cabinets that are built into the structure
- ⬥ Window blinds
- ⬥ Detached garages (maximum of 10% of the policy amount)
- ⬥ Costs for debris removal
Note: If you opt for personal possession flood insurance the actual cash value – not the purchase price – is used to determine the payout.
The following items are usually covered:
- ⬥ Clothing, furniture, electronics
- ⬥ Curtains
- ⬥ Window AC units
- ⬥ Portable microwaves and dishwashers
- ⬥ Other carpets not covered by structure flood insurance
- ⬥ Washers and dryers
- ⬥ Freezers
- ⬥ Spoiled frozen food
- ⬥ A maximum of $2,500 for valuables (e.g. furs, art, jewelry, etc.)
4. The government’s definition of “flood” may not be the same as yours
The NFIP defines a flood as follows:
Water should cover a minimum of 2 acres of land which is normally dry or it should have damaged two or more properties (including your home).
In addition, the water has to be a result of:
- ⬥ Inland or tidal waters overflowing their normal courses
- ⬥ Atypical and rapid accumulation or runoff of surface waters from any source
- ⬥ Mud that’s carried by water (i.e. mudflow)
- ⬥ Collapse or sinking of shorefront land that drops below normal, anticipated levels
Note: Sewer or drain backups or a failing sump pump are not defined as a flood
5. An elevation certificate can reduce your rates
An elevation certificate is required to adequately determine how much you will pay for flood insurance (whether or not your lender requires it).
If your property is high enough above the floodplain you may not be required to pay for flood insurance or your rates may be significantly lower than someone who is in the lowest lying areas of the region.
Communities who agree to participate in the NFIP are required to submit elevation certificates as part of the application process so one may already be available for you to review.
Check with your zoning or planning and development authorities in your region to see if an elevation certificate has been done for your home and land.
If not, you can have one completed by one of the following individuals who have been authorized to certify elevation information for about $500 to $2,000:
- ⬥ Licensed Land Surveyor or
- ⬥ Registered Professional Engineer or
- ⬥ Registered Architect
