What does flood insurance cover?
Having adequate insurance for your home, automobiles, personal property, and business means that you must understand what you own, the possible losses you face, and the risk of events causing those losses.
Flood insurance represents one of those products that you should consider in protecting your property and finances. As you’ll read below, your current insurance may not be sufficient if you stand in the path of nature’s wrath. In considering flood insurance, you should not treat it as the answer for everything you might lose from a flood.
What Does Homeowners Insurance Cover in a Flood?
As a general rule, you get no coverage from flood damage in a standard homeowners’ policy. Homeowners’ insurance pays for losses you sustain from fires, lightning, storms, theft, falling objects, and other disasters.
Insurers exclude flood damage from standard homeowners’ policies because of the high risk of damage presented by flooding. Such incidents present themselves in 90 percent of all natural disasters. Thunderstorms, prolonged rain events, melting snow, hurricanes, other tropical systems, and runoff from heavy rain produce floods. Even one inch of water in your home can cost you $26,000 in damage due to mold, mildew, and destruction of carpets, floors, and personal property in a structure.
With the strong potential for significant losses from flooding, insurance companies cannot viably offer flood insurance as a standard part of the coverage. Separate flood insurance keeps premiums on standard homeowners’ insurance from skyrocketing.
Do I Need Flood Insurance?
If you live in an area which the Federal Emergency Management Administration (FEMA) designates as a high-risk flood zone and have a federally-insured or federal mortgage, you must carry flood insurance. Click to learn if you live in a high-risk flood zone in North Carolina.
Even if you do not fall in the mandate, you may wish to avail yourself of flood insurance. Your home may still be within a high-risk area or place susceptible to flooding. In the next 30 years, homes in places rated as having low to moderate risk for flooding stand five times more likely to face floods than fires. These locations account for one in every five flood claims.
What Does Flood Insurance Cover?
The National Flood Insurance Program (NFIP) provides the majority of flood insurance for property owners. Under the NFIP, you get coverage for the buildings and contents in them that succumb to flooding. The limits depend upon whether you’re a homeowner, business owner, or tenant:
- Residential property: $250,000 for the building and $100,000 for contents
- Business property: $500,000 for the building and $500,000 for contents
- Renters: $100,000 for the contents. As a renter, you do not own the building. That means your coverage is limited to your personal items.
You get coverage for the structural components damaged by floods, such as walls, staircases, and floors. Several permanently-affixed items also come within flood insurance, such as:
Coverage extends to the plumbing, wiring, circuit breakers, heating/ventilation/air conditioning systems (HVAC), sump pumps, solar energy panels and other equipment, fuel tanks, water heaters, and water tanks. You also get the costs of replacing the fuel and water in the tanks.
NFIP flood insurance also reimburses you the replacement costs for walk-in freezers, blinds, refrigerators, and other built-in appliances.
Flood insurance covers damage to garages that are detached from the residence. However, you are limited to 10 percent of the building coverage, and whatever you use on the detached garage is subtracted from your overall building coverage.
Personal property comes under the umbrella of the contents portion of flood insurance. These items include:
- Carpet installed over wood floors
- Washers and dryers
- Free-standing bookcases
- Beds, dressers, and other bedroom suites
- Televisions, computers, computer accessories, and other personal electronics
- Exercise equipment
- Original art, furs, and collectibles (maximum of $2,500)
Federal flood insurance does not cover damage to the structures or contents of basements. As to structures with crawl spaces or which are constructed on elevated foundations or supports, the limits depend on the “Base Flood Elevation” in your area — assuming your building was constructed after the effective date of the initial “Flood Insurance Rate Map.” FEMA establishes the Base Flood Elevation for an area based upon a one percent chance that a flood will meet or exceed a particular elevation. The Flood Insurance Rate Map shows the Base Flood Elevation for a particular location. Damage to building components and contents below the Base Flood Elevation does not get coverage.
The Amount of Your Claim
By default, NFIP flood insurance pays you the actual cash value of the buildings and personal property you lose from a flood. Actual cash value is defined as replacement cost less the physical depreciation of the item of property. Depreciation often arises with personal property, especially tanks, heat pumps, air conditioners, industrial or business equipment, electronics, and computers.
The building you must replace likely must meet more stringent building, electrical, and zoning codes. To account for the increased cost to comply with current codes, your federal flood insurance will pay up to $30,000 for such upgrades under the “Increased Cost of Compliance” coverage.
The damage for which you seek coverage must arise or result from flooding. For purposes of this insurance, a flood occurs when water occurs excessively on normally dry land and impacts at least two acres of land or two properties. While floods generally occur in natural disasters, flood insurance will cover floods from human-made occurrences. Such may include water flowing from a water main or line ruptures or swimming pool collapses that affect you and at least one other property.
To understand what does flood insurance cover, you should grasp what is excluded. Flood insurance will not pay for damage resulting from mold, mildew, or moisture that you could have reasonably avoided. This exclusion arises when you fail to take reasonable measures to remove or stop mold and mildew. You would not get coverage for sewer backups if the flood did not cause it, such as when a sewer system malfunctions from a power outage rather than flooding. Exclusions also apply to damage when earth is moved, even if the force of floodwaters moved the ground.
Federal flood insurance excludes many types of losses that may occur from a flood. These include:
- Currency, such as coins and bills
- Gold, silver, platinum, and other precious metals
- Scripts for plays, movies, television programs, and other performances
- Stock certificates
- Deeds, insurance policies, and other valuable legal documents
- Recorded data
- Lost income and other business interruption losses
- Property stored in outbuildings or kept outside of the structure, such as lawn equipment, fences, seawalls, decks, hot tubs, outdoor fireplaces or fire pits, and swimming pools
- Loss of use of property, including the cost of hotel or motel stays
Other forms of insurance may reimburse at least some of these losses. For example, comprehensive coverage on your vehicle will pay the fair market value of the flooded vehicle. You can recover lost income and other business-related losses from flooding through business interruption insurance. Flood insurance covers the cash value of damaged or destroyed business equipment.
Under the NFIP program, you must wait 30 days after purchasing flood insurance for coverage to take effect. This means you get no benefits under the National Flood Insurance Program for any flooding event that occurs within 30 days after you obtain flood insurance.
Can I Get Private Flood Insurance?
For losses that flood insurance under the federal government excludes, you may resort to private flood insurance. This insurance can supplement or take the place of NFIP insurance if it affords the standard coverage. For example, flood insurance from private carriers may cover your expenses for relocating from a flooded residence or having to stay somewhere else while your home gets repaired.
Get North Carolina Flood Insurance
North Carolina’s numerous rivers, streams, lakes and its roughly 322 miles of ocean shores afford scenic views and abundant chances for recreation. However, all of this water and the state’s vulnerability to hurricanes, heavy thunderstorms, and other rain events creates a risk that your home may suffer flood damage. A North Carolina flood insurance agent can show you whether you’re in a flood zone, the level of risk, and rates for flood insurance.