Your Top 5 Flood Insurance Questions—Answered

We are always flooded with questions.

Sorry, can’t resist a good dad joke.

We this month on Top 5 we address the Top 5 Questions About Flood. In recent years flood coverage has become a rather important aspect of home ownership with more banks having it as a requirement.  

You got questions and we got answers. Let’s get to it.

Does My Homeowner’s Policy include Flood Coverage?

No.

We could leave it there, but let’s delve a little deeper.

Sometimes there is a bit of confusion because there is a sublimit on some homeowner’s policies called water damage. However, this coverage is only for damages caused by something like a pipe burst and does not cover damages by rising water.

There are also very rare instances where a homeowner’s policy could possibly have flood coverage, but it is extremely rare, and it should never be assumed you have coverage.

More than likely, you’ll have to purchase a separate policy.

Do I Need Coverage If I’m Not in a Flood Zone?

We have heard it plenty.

“But I’m not in a Flood Zone.’

You are.

In fact, it’s impossible not to be in one. What you are actually saying is that you are in a flood zone that isn’t in a danger zone.

But that isn’t true either. Per FEMA, most of the flood maps are outdated. Which means that you may be in a flood zone which used to have a low likelihood of a flood, but now due to new constructions and other contributing factors, the likelihood is probably higher.

As a homeowner you should be assessing every possible risk and preparing for it. Flood insurance should be a priority.

Are There Private Insurance Companies?

Short answer is yes.

But as we’ve learned, there are no truly short answers in insurance.

Most of the time when you are buying flood insurance, you’re doing so from the NFIP (National Flood Insurance Program) which is a federal program. Meaning that you buy a policy that is directly backed by the United States government.

However, all NFIP policies only go up to $250,000 worth of coverage, which in today’s market, it be near impossible to find a structure that can be rebuilt completely at that number.

Private flood insurers are a more recent addition to the market, especially in the areas where flood losses hit hardest.

Our suggestion? Look at both options and use your discernment to see which one best suit your asset.

What Does a Flood Policy Cover?

Perhaps the most important question of all.

As we discussed, NFIP policies cover up to $250,000 in replacement cost. However, there is a caveat. That being that coverage is only for your primary residence. If it’s a secondary residence or if it’s an investment property, the coverage is actual cash value. Meaning you’ll get compensated for whatever the current cash value instead of what it takes to replace it.

A homeowner’s policy usually has sub limits, such as loss of use. But flood policies have no sub limits whatsoever. Also, unless it is a garage, detached structures are not covered by your flood policy and things like sheds need to have their own flood policies.

Knowing these things will go a long way towards making sure you don’t any unpleasant surprises at the time of a claim.

Why Is My Neighbor’s Premium Lower Than Mine?

Comparison is the thief of joy.

But it’s just human nature to make sure you aren’t getting “ripped off”.

But it’s never that simple. The NFIP is an old program, and some people are grandfathered into older rates since they have been in the program for years. When you buy a new home, even it’s right next to this person, you will have to pay a premium based on current rates.

You do have one option though.

Talk to your agent about assuming the previous owner’s policy. Flood polices are the only policies you can assume from the previous policyholder. If you can, you’ll then be on their glide path, meaning your rates will increase at the pace of someone who is grandfathered in.

Thank you for reading Top 5 Questions About Flood Insurance! If we missed anything you’d like to know, let us know!