According to the Federal Emergency Management Agency (FEMA), floods are the most common, and most costly, natural disaster. Floods can happen anytime and anywhere, and they can happen fast. Flood damage is not covered under a standard homeowners policy.
What is a flood?
A flood is an excess of water (or mud) on land that's normally dry. The National Flood Insurance Program (NFIP) defines a flood to be a general and temporary condition of partial or complete inundation of two or more acres of normally dry land area, or of two or more properties (at least one of which is the policyholder's property) from overflow of inland or tidal waters; unusual and rapid accumulation or runoff of surface waters from any source; mudflow; or collapse or subsidence of land along the shore of a lake or similar body of water as a result of erosion or undermining, caused by waves or currents of water exceeding anticipated cyclical levels.
What is flood insurance?
Flood insurance is a special policy that is federally backed by the NFIP and available for both homeowners and businesses. You can buy flood insurance for your home or business regardless of whether the property is in or out of a floodplain, as long as the property is located in a participating community.
You may buy flood insurance covering up to $250,000 of flood damage to your home. A standard flood policy will cover structural damage, including damage to the furnace, water heater, air conditioner, floor surfaces (carpeting and tile) and debris clean up. For an additional premium, you also may buy flood coverage for up to $100,000 of damage to the contents of your home.
Coverage is available for up to $500,000 for non-residential buildings and their contents.
What does flood insurance cover?
A standard flood insurance policy is a single-peril (flood) policy that pays for direct physical damage to your insured property up to the replacement cost or actual cash value (ACV). ACV is replacement cost value (RCV) at the time of loss, less the value of its physical depreciation. Some building items such as appliances and carpeting are always adjusted on an ACV basis. Personal property is always valued at ACV.
What is covered at replacement coverage and what is covered at ACV?
RCV is the cost, without depreciation, to replace that part of a building that is damaged. To be eligible, three conditions must be met:
- The building must be a single-family dwelling; and
- The building must be your principal residence at the time of loss, meaning you live there at least 80 percent of the year; and
- Your building coverage is at least 80 percent of the full replacement cost of the building or is the maximum available for the property under the NFIP.
How much does flood insurance cost?
Premiums for flood insurance will vary depending upon your risk level for a flood loss, the amount of coverage you choose, the type of coverage you need and your deductible.
How can I buy flood insurance?
You can purchase flood insurance for your home or business regardless of whether the property is in or out of a floodplain, directly from your property and casualty insurance agent, or insurance company if your community participates in the NFIP. Your insurance agent or insurance company also can confirm whether flood insurance is available to you and what it would cost.
It is very important to plan ahead. A flood insurance policy normally will not go into effect until 30 days after you purchase the policy.
The following tips could help to keep you safe before, during and after a flood:
- For personal safety, identify what storm shelter is available to you and prepare an evacuation plan.
- Make sure you have bottled water, a first aid kit, flashlights, a battery-powered radio, non-perishable food items, blankets, clothing, prescription drugs, eyeglasses, personal hygiene supplies and a small amount of cash.
- If you need to evacuate your home, turn off all utilities and disconnect appliances to reduce the chance of additional damage and electrical shock when utilities are restored.
- Take proactive steps to protect your property from loss. Be sure there is no loose siding on your home and no damaged or diseased trees growing over your home.
- Take an inventory of your personal property, such as clothes, jewelry, furniture, computers and audio/video equipment. Photos and video of your home as well as sales receipts and the model and serial numbers of items will make filing a claim simpler. In addition, add insurance information to your inventory information - the name of your company and agent, policy number and contact information.
- Move all of your important documents to a safe location. Take them with you when you evacuate or store them in a safe deposit box outside the area.
FEMA has compiled a list of steps to take to mitigate potential property damage before a flood occurs:
- Location of the site - selection of the proper site can be a positive factor in avoiding future flooding. Avoid building in locations that are within known flood zones.
- Elevation of the site - your site planning should include evaluation of base flood levels. Building so that the lowest living level is above the base flood level will help avoid future damage.
- Drainage of the site - the landscaping plan for the new site should take into consideration methods for rapidly draining water away from the house, particularly in the event of flash flooding. Underground drain tiles and sump pumps, if not required by code, should be considered as part of the overall drainage plan.
- Sewer system - installing a backflow valve in the sewer line or septic system will temporarily prevent sewer back up.
- Electrical system - raise the electrical system components above the base flood level. This includes electrical wiring, outlets, switches, meters and service panel.
- Fuel tanks - anchor fuel tanks so they will not float, and raise vent and filler tube above the base flood level.
- Heating, ventilating and cooling system - install HVAC systems above the base flood level or floodproof to the base flood level existing HVAC equipment if possible.
- Rethinking basement usage - basements in the upper midwest and plains states are used quite extensively as functional living areas and storage areas. Consider redesigning your use of the basement. For example, store important documents and valuable papers and objects where they will not get damaged, use removable carpeting, relocate appliances to a safe level, etc.
- Buy flood insurance - purchase flood insurance to cover the building and contents.
Myth: Only those people living in a flood plain need to be concerned about flooding.
It is a common misconception that people living in a designated flood plain are the only ones who need to worry about flooding. Recent experience in North Dakota has taught us that locations outside the flood plain are susceptible to flooding, in particular, flash flooding.
Myth: If I have direct flood damage to my home my homeowners policy will cover me.
The standard homeowners insurance policy language clearly indicates that flood is excluded. The unpredictability and severity of flood events are so significant that regular insurance companies are unable and unwilling to provide coverage for flood. It is noteworthy that sewer and sump pump failure, as well as underground seepage, are also excluded. However, many insurance companies have elected to offer the ability to buy an endorsement with a limited amount of coverage for sewer or sump system failure
Myth: If I have a sewer or sump pump endorsement to my policy, I will be covered in the event of a flood.
A sewer or sump pump endorsement on your policy does not mean you have coverage for flood. Most companies make it clear that they still do not cover flood damage only sewer damage. Some companies make it clear that if a flood is a cause, directly or indirectly, of sewer or sump pump failure, they will not cover any of the damage. Purchasing a sewer or sump pump endorsement should not be viewed as a purchase of flood insurance.
Myth: Since my mortgage company does not require me to have flood insurance, I shouldn't have to worry about flooding.
Mortgage companies that issue federally regulated mortgage loans by law must require borrowers whose property is in a designated flood zone (Special Flood Hazard Area) to carry flood insurance. However, loans that are not regulated by a federal program do not have this requirement. Further, experience has shown that not all mortgage companies have complied with this requirement and may not have required insurance when they should have. Since flooding can occur in areas other then just the designated flood zone, a consumer should avoid this false assumption.
Myth: We experienced a once in a 500-year flood in 1997 so I shouldn't have to worry about flooding again during my lifetime.
The use of the terms "100-year floodplain" or "500-year floodplain" have created a false sense of security in the public. If you are in a 100-year floodplain it means that every year you have a one percent chance that it will flood. So in the case where a flood event of a 500-year proportion occurred in 1997, it doesn't mean you will not have another flood of this magnitude for another 500 years. If conditions were right, i.e. ground saturation, snowpack, timing and duration of the spring thaw, storms, ice jams, etc., an occurrence of that magnitude could happen again.
Myth: You can't buy flood insurance if you are located in a high flood-risk area.
You can buy flood insurance no matter where you live if your community participates in the National Flood Insurance Program (NFIP) (except in the Coastal Barrier Resources System areas). The program was created in 1968 to provide flood insurance to people who live in areas with the greatest risk of flooding called special flood hazard areas (SFHA). In fact, lenders providing a federally-regulated mortgage loan must require borrowers in the SFHA to purchase flood insurance.
Myth: You can't buy flood insurance immediately before or during a flood.
You can purchase flood coverage at any time. However, for most applicants, there is a 30-day waiting period after you've applied and paid the premium before the policy is effective. There are some exceptions to this waiting period requirement so it is recommended you discuss this with an agent to determine if you are eligible. The policy does not cover a "loss in progress," defined as a loss occurring as of 12:01 a.m. on the first day of the policy.
Myth: Homeowners insurance policies cover flooding.
Homeowners policies do not cover direct physical loss caused by a flood.
Myth: Flood insurance is only available for homeowners.
Flood insurance is available to protect homes, condominiums, apartments and nonresidential buildings, including commercial structures. Residential structures, including condominiums, may be insured to a maximum of $250,000 per unit. The limit for contents on a residential building is $100,000, which is also available to renters. Commercial structures can be insured to a limit of $500,000 for the building and $500,000 for the contents.
Myth: You can't buy flood insurance if your property has been flooded.
You are still eligible to purchase flood insurance after your home, apartment or business has been flooded, provided that your community is participating in the NFIP.
Myth: Only residents of high-risk flood zones need to insure their property.
Even if you live in an area that is not flood-prone, it is advisable to have flood insurance. Between 20-25 percent of the NFIP's claims come from outside high-risk flood areas. The NFIP's Preferred Risk Policy, available for just over $100 per year, is designed for residential properties located in low to moderate-risk flood zones.
Myth: NIFP flood insurance can only be purchased through the NFIP directly.
NFIP flood insurance is sold through private insurance companies and agents and is backed by the federal government.
Myth: The NFIP does not offer any type of basement coverage.
Yes, it does. The NFIP defines a basement as any area of a building with a floor that is below ground level on all sides. While flood insurance does not cover basement improvements, such as finished walls, floors or ceilings, or personal belongings that may be kept in a basement, it does cover structural elements, essential equipment and other basic items normally located in a basement. Many of these items are covered under the building coverage and some are covered under the contents coverage portion of the policy. The NFIP encourages people to purchase both building and contents coverage for the broadest protection.
Myth: Federal disaster assistance will pay for flood damage.
Before a community is eligible for disaster assistance, it must be declared a federal disaster area. Federal disaster assistance declarations are issued in less than 50 percent of flooding incidents. The premium for an NFIP policy averages little more than $300 a year, which is less expensive than interest on a federal disaster loan. Not all federal disaster aid comes in the form of a grant. Most of the aid is in the form of low-interest rate loans that must be paid back. Furthermore, if you are uninsured and receive federal disaster assistance after a flood, you must purchase flood insurance to remain eligible for any future disaster relief.
Myth: The NFIP does not cover flooding resulting from hurricanes or the overflow of rivers or tidal waters.
The NFIP defines covered flooding as a general and temporary condition during which the surface of normally dry land is partially or completely inundated. Two properties in the area or two or more acres must be affected. Flooding can be caused by the overflow of inland or tidal waters or the unusual and rapid accumulation or runoff of surface waters from any source, such as heavy rainfall, or mudslides, i.e., mudflows, caused by flooding, that could be described as a river of liquid and flowing mud and the collapse or destabilization of land along the shore of a lake or other body of water, resulting from erosion or the effect of waves, or water currents exceeding normal, cyclical levels.
Myth: Wind-driven rain is considered flooding.
No, it isn't. Rain entering through wind-damaged windows, doors or a hole in a wall or the roof, resulting in standing water or puddles, is considered windstorm (rather than a flood) damage. NFIP flood insurance only covers damage caused by the general condition of flooding typically caused by storm surge, wave wash, tidal waves or the overflow of any body of water over normally dry land areas. Buildings that sustain this type of damage usually have a watermark, showing how high the water rose before it subsided. The standard flood policy does not cover wind or hail damage.