What is Flood Insurance?

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

A Longer Definition: Flood Insurance

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

Flood insurance policies are offered through the National Flood Insurance Program (NFIP), managed by the Federal Emergency Management Agency (FEMA), as well as by some private insurers. 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. Homes located 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 becomes effective.

Flood Insurance: A Real World Example

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

The area experiences flooding about once every 100 years.

To be safe, the home buyer purchases an affordable flood insurance policy to complement their existing hazard insurance policy. Several months later, a major storm hits the area.

Heavy rainfall overwhelms the sewer systems and water enters the home, flooding the ground floor and basement. Walls, flooring, and personal belongings are damaged.

The flood insurance company sends an adjuster to assess the damage. The insurer then provides the home buyer with a check to cover the cost of repairs and replacement of 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 but recommended for homes owned free-and-clear, purchased without a mortgage, or in low-to-moderate-risk flood zones.

What doesn’t flood insurance cover?

Flood insurance does not cover damage to external elements of a home, such as landscaping or septic systems. Additionally, 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 often should, obtain flood insurance. 25 percent of flood insurance claims come from areas considered to have low flood risk.

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 purchase date. If your home floods during this waiting period, your policy will not cover the damage.