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Homeowners Insurance v. Flood Insurance

| October 18, 2017
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In the aftermath of Hurricane Harvey, homeowners everywhere must be wondering what they can do to protect themselves from the risk of flooding.

What many people don’t realize is that while your homeowner’s insurance policy may cover you for water damage, that coverage may not extend to flood damage. Homeowners insurance will generally cover wind damage and, in certain cases, water damage from storm surges as well as internal water leaks such as a broken pipe or washing machine. Water damage from a flooding event is not covered.

According to the Federal Emergency Management Agency (FEMA), a flood is defined as a general and temporary condition of partial or complete inundation of two or more acres and two or more properties of normally dry land. Flood damage is considered to be caused by overflow of inland or tidal waters, unusual and rapid accumulation of surface waters from any source, mudflow, or the collapse of land along the shore of a lake or similar body of water as a result of erosion1.

To protect yourself from flood damage, you can buy a flood insurance policy from the National Flood Insurance Program (NFIP). The NFIP provides replacement cost coverage up to $250,000 for the structure of the home and up to $100,000 in actual cash value for personal possessions. Replacement cost coverage pays to rebuild your home as it was before the damage. Actual cash value is replacement cost minus depreciation, which means that the older your personal possessions, the less you will receive for them. You can also buy excess flood insurance through a private carrier if you need more than $250,000 in flood coverage. Keep in mind that there is a 30-day waiting period from the time you purchase a policy to when you can file a claim2.

Homeowners in areas designated as 100-year flood zone are required to hold flood insurance policies from the NFIP. However, this requirement is difficult to enforce and most people fail to buy coverage or let their policies lapse by not paying the premiums3.

You do not have to live in a flood plain to purchase flood insurance. Flood can and often does affect homeowners outside the radius of designated flood plains as we have witnessed from the aftermath of Hurricane Harvey. It is important to weigh the risks before you end up soaked.

  1. https://www.ameriprise.com/auto-home-insurance/aah/learning-center/understanding-insurance/types-of-coverage/water-damage-vs-flood-damage/
  2. http://www.iii.org/article/does-my-homeowners-insurance-cover-flooding
  3. https://www.nytimes.com/2017/08/28/business/dealbook/flood-insurance-harvey.html

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