Many homeowners and renters learn too late that homeowners insurance or renters insurance doesn’t cover damage or loss from flooding – only flood insurance does. And while homes and businesses located in high risk areas that have mortgages from federally insured or regulated lenders are required to have flood insurance, coverage is available to anyone. In fact, according to the National Flood Insurance Program (NFIP) website, 20 percent of its claims are filed by policyholders outside of high-risk areas, and that a third of all disaster relief for flooding (usually loans that must be repaid) goes to such areas as well.
Created by Congress in 1968, NFIP provides coverage for flood-related damage to residential and commercial property. NFIP is administered by the Federal Emergency Management Agency (FEMA), which sets premium rates, but policies can be purchased through commercial insurance companies. Premiums for NFIP coverage vary according to risk assessment and factors related to the home or commercial property to be insured.
What Is (and Is Not) Covered by Flood Insurance
Flood insurance is available to cover structural damage and damage to contents to homes and commercial properties, with the term “home” pertaining to houses, townhomes, condos and rental units. Damage from flooding that occurs through extreme weather or by other unavoidable circumstances is covered. On the other hand, damage from mold that could have been avoided is not covered, nor is damage to trees, cars or structures not associated to the home or business property. Coverage is limited for basements and other areas of structures located below what the NFIP website designates as the “lowest elevated floor.”
There are two major categories of flood insurance coverage available: Low to Moderate Risk or High Risk. Flood zones are determined by flood maps developed by FEMA. Examples of Low to Moderate risk areas include inland areas not located near major waterways and not prone to flooding from severe weather. High Risk areas include coastal areas or areas located within a floodplain. The age of a structure and its contents (inventory) also influence risk assessment.
Recommended Coverage and Payments
Depending on your circumstances, you should purchase flood insurance coverage for the structure and your contents or for your contents only. Most policies carry a 30-day waiting period, and premiums must be paid in advance for the entire year.
- Homeowners/Business Owners: Structural and content coverage.
- Condo Owners/ Business Leases: Content coverage and possible structural coverage
- Residential and Commercial Renters: Content Coverage only.