4 Questions to Ask About Flood InsurancePosted on Apr 25, 2017
Flood insurance is something all too many homeowners believe is covered under their standard homeowners’ insurance policies. This is not the case in most situations. In fact, most homeowner’s policies explicitly exclude flood damage from their coverage. This means you must buy a flood insurance policy for your home.
For many homeowners, the National Flood Insurance Program (NFIP) provides an affordable solution for getting the flood insurance protection they need. Before you decide this is the best option for you, there are a few questions you should find the answers to.
1) Do I Really Need Flood Insurance?
In 1969, Hurricane Camille came ashore on the Mississippi Gulf Coast causing massive destruction and bringing with it the highest recorded storm surge in the Atlantic Basin at that time. The high-water marks from Camille served, for more than three decades, as the litmus test for families considering where they would build, if they should buy flood insurance, and whether or not they would evacuate during hurricanes.
If the home was dry during Camille, people assumed their homes were safe from storm surge and flooding – until Hurricane Katrina came long in 2005 and obliterated the previous record by more than three feet and causing devastating destruction, not only along the coastline, but further inland where streams, creeks, rivers, lakes, and ponds that had rarely, if ever, flooded before, overflowed their banks.
Taking hard lessons like this into account and because nearly 20 percent of all flood claims filed with NFIP come from outside of high-risk flood areas, it’s a sound investment for all homeowners to make.
This is especially true when you consider that these numbers only include people who were covered by flood insurance and not the huge number of people outside of high-risk areas who did not purchase such insurance. In fact, flash floods and floods happen in all 50 states, including of course, here in New Jersey.
2) What are Flood Insurance Coverage Limits?
For homeowners, flood insurance provides coverage for up to $250,000 for the physical structure of your home and up to $100,000 for personal possessions inside your home. If the value of your home or possessions exceeds this amount, you might want to consider alternative or additional flood protection for your home and possessions.
3) Are There Coverage Exclusions for Flood Insurance through NFIP?
Because there are coverage limits, flood insurance naturally does not cover the repair or replacement of items that exceed those limits. Additionally, it doesn’t cover furnished areas located below ground level, such as basements, even if the basement is finished. It will, however, cover the repair or replacement of hot water heaters or furnaces that are located in the basement. Also, PBS reports that flood insurance doesn’t offer temporary living expenses the way your homeowner’s policy does if you must make additional living arrangements while repairs are being made to your home. Those costs will come out of pocket.
4) When Does Your Flood Insurance Policy Go Into Effect?
Unless you are buying a home or refinancing your home and taking out a loan to do so, you will face a 30-day waiting period before your flood insurance policy goes into effect. Otherwise, your policy typically becomes active on the date when you close the loan.
According to the LA Times, the average claim for floods filed with the NFIP is approximately $30,000. That makes flood insurance essential for most U.S. homeowners who can’t typically afford those types of expenses out of pocket.