What is Flood Insurance?

Flood insurance is a specific type of homeowners insurance that covers losses and damage due to overflowing bodies of water.

A Longer Definition: Flood Insurance

Flood insurance is protection against damages to a home and personal belongings caused by flooding, which is typically not covered under a standard homeowners insurance policy.

Flood insurance policies are provided through the National Flood Insurance Program (NFIP), managed by the Federal Emergency Management Agency (FEMA) and some private insurers. Flood coverage usually includes the building’s structure, electrical and plumbing systems, HVAC equipment, water heaters, permanently installed carpeting, paneling, wallboard, bookcases, and cabinets. Personal contents such as clothing, furniture, and electronic equipment can also be covered, but typically under a separate policy.

Flood insurance premiums vary based on a home’s location, age, design, and the chosen insurance deductible and policy limits. Properties in high-risk flood zones generally have higher premiums due to the increased likelihood of flooding.

There is usually a 30-day waiting period from the date of purchase before a flood insurance policy goes into effect.

Flood Insurance: A Real World Example

Imagine a first-time home buyer who purchases a coastal area property. The area is known for heavy rain and occasional flooding, but it’s not marked as a FEMA high-risk flood zone.

The area floods once every 100 years.

To be safe, the home buyer purchases an inexpensive flood insurance policy to complement their existing hazard insurance policy, and several months later, a major storm strikes the area.

Large amounts of rainfall overwhelm the sewer systems and enter the home buyer’s property, pushing several inches of water into the home’s ground floor and basement. Walls, flooring, and personal belongings sustain damage.

The flood insurance company sends an adjuster to review the damage, then writes the buyer a check to pay for repairs and the cost of replacing the damaged personal items.

Common Questions About Flood Insurance

Are home buyers required to purchase flood insurance?

Mortgage lenders require flood insurance for homes in high-risk flood zones. Flood insurance is optional and recommended for homes owned free-and-clear, purchased without a mortgage, or not in a low-to-moderate-risk flood zone.

What doesn’t flood insurance cover?

Flood insurance does not cover damages to external elements of a home, like landscaping and septic systems. Also, coverage for basements under flood insurance is limited.

Can I obtain flood insurance if I’m not in a high-risk zone?

Yes, homeowners in moderate-to-low-risk areas can, and usually should, obtain flood insurance. 25 percent of flood insurance claims originate in areas that are at low risk of flooding.

Does flood insurance cover temporary living expenses?

No, flood insurance typically does not cover additional living expenses. If your home becomes uninhabitable due to flooding, these costs are usually not covered under a standard flood insurance policy.

Does flood insurance start working immediately after purchase?

No, there is usually a waiting period before flood insurance becomes effective, typically 30 days from the date of purchase. If your home floods during the immediate 30-day period, it won’t be covered by your policy.