What Does Flood Insurance Cover?

Posted on Aug 19, 2015

Standard homeowners insurance policies do not cover floods. Most people need to purchase coverage from the National Flood Insurance Program, usually called the NFIP.

Even though the NFIP is a government program that was established to help property owners buy affordable flood protection, you still buy flood insurance from insurance agents. Besides homeowners and business owners, renters can also purchase coverage for their personal property.

What Does Flood Insurance Cover?

You can choose to buy one or both types of flood insurance:

  • Buildings: Up to $250,000 of building coverage can be purchased to insure a building and the building’s foundation. Besides a home, this could include a detached garage, the electrical system, and most permanently installed fixtures within the building.
  • Personal property: Up to $100,000 of personal property insurance can be purchased to insure the contents of a building. This includes items like clothes, portable appliances, electronics, and furniture.

The NFIP encourages property owners to purchase both types of coverage to make sure both the building and the items inside of the building get insured. You are free to select different coverage amounts and deductibles for each policy. You can buy flood insurance for both homes and commercial properties.

What Doesn’t Flood Insurance Cover?

Not everything gets covered by flood policies. One major example is an exclusion of belongings outside of a building. For example, swimming pools and outdoor spas aren’t covered, but a Jacuzzi bathtub inside of the bathroom should be. Another example of a hazard that isn’t covered is mold or mildew that a homeowner might have prevented. In other words, building owners are still expected to get proper flood remediation done as quickly as possible in order to mitigate damage.

Flood Insurance Requirements and Rates

The NFIP constantly updates flood zone maps. Within a rate map, they designate high, moderate, and low-risk zones. A building’s location within one of these zones is used to determine rates. Flood insurance within low-risk zones is quite affordable. Obviously, coverage within high-risk zones will cost more.

Besides the risk zone, flood policy rates may also depend upon the age and type of property. Some communities that participate in the Community Rating System, also called the CRS, may help earn community members a discount. Otherwise, premium quotes don’t vary by insurance company.

Most home and building owners aren’t required to purchase this coverage. However, anybody who owns a home or business within a high-risk zone and has a federally insured or funded loan will need to purchase coverage to comply with their lender’s requirements. While lenders don’t require this kind of protection within low and moderate-risk zones, they may still recommend it. According to FloodSmart.gov, at least 20 percent of all claims filed come from property owners outside of high-risk zones.

Why Buy Flood Insurance Now?

Many types of insurance become effective as soon as the bill has been paid. This is not usually true for flood insurance, so you really can’t wait until the last minute to buy this type of coverage. It’s too late to purchase flood insurance after there has already been a flood. Moreover, it might be too late after predictions of hurricanes, tropical storms, or other major natural events make the evening weather.

This is because policy holders will usually have a 30-day waiting period between the purchase of new coverage and the time that coverage becomes effective. Some exceptions to this 30-day waiting period include new loans, changes to the rate maps, and changes to requirements by lenders. If you aren’t sure when your policy becomes effective, please ask us.

Contact us here at Otterstedt Insurance Agency at 201-227-1800 to learn how flood insurance can protect your home or business.

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