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Flood Insurance: What it is and how it works

When it comes to disasters, floods are among the most common and destructive. Flooding can occur due to heavy rains, tsunamis, and even man-made causes such as dam failures. In the United States, flooding is the most common natural disaster and the number one cause of property damage. Unfortunately, many people are not aware that standard homeowners insurance policies do not cover flood damage. This is where flood insurance comes in.

Key Takeaways

  • Flood insurance can help cover the cost of cleanup, replacement, and repairs if your home is damaged in a flood.

  • If you live in a high-risk flood zone, your mortgage lender may require you to purchase flood insurance.

  • Most insurance providers offer flood insurance through the federal government's National Flood Insurance Program (NFIP), though there are also options to buy private flood insurance as well.


What is Flood Insurance?

Flood insurance is a separate type of insurance policy that helps cover property damage due to flooding. You can purchase a flood insurance policy either through the National Flood Insurance Program that's managed by the federal government or through a private insurance company.


How Do Flood Insurance Policies Work?

Flood insurance policies are typically issued as separate policies, distinct from your homeowner's insurance policy. There are typically two types of flood insurance policies available:

  • National Flood Insurance Program (NFIP) These policies are generally backed by the Federal Emergency Management Agency (FEMA). While the policies are managed by FEMA, they're purchased through private insurance companies. The NFIP provides coverage available up to $250,000 for property damages and up to $100,000 of personal property coverage.

  • Private flood insurance policies. On the other hand, private flood insurance policies are more customizable based on the policyholder's property and specific needs. Private flood insurance often provides access to more comprehensive coverage with higher limits for your home and belongings.


What Does Flood Insurance Cover?

You generally can purchase coverage to help protect your home, your personal belongings, or both. This is usually referred to as building coverage and contents coverage.

  • Building property coverage: this will generally provide coverage for flood damage to the structure of your home and any detached garages on your property. For specifics, its always best to refer to your policy.

  • Personal belongings coverage: this will generally provide coverage for your personal property inside the home if it is damaged by a flood. This can include things like clothing, furniture, and electronics to name a few. As always, there are special limits for certain valuables which can include artwork, jewelry and collectibles. For specifics, its always best to refer to your policy.

What Does Flood Insurance NOT Cover?

Equally important is knowing what's not typically covered by flood insurance. A few examples of the types of property and expenses that usually won't be covered by a basic flood insurance policy, according to NFIP:

  • Moisture or mold/mildew damage that "could have been avoided by the homeowner"

  • Currency, precious metals, and paper valuables, like stock certificates

  • Outdoor property such as decks, fences, patios, landscaping, wells and septic systems, and hot tubs and pools.

  • Living expenses, like temporary housing (if flood damage deems your home uninhabitable)

  • Cars and other self-propelled vehicles

Additionally, flood insurance generally provides very limited, if any, coverage for below-ground rooms like crawl spaces and basements and their contents. Some items in these spaces like a furnace may be included under building coverage. Others, like a washer/dryer are typically covered under personal contents coverage, but some items like personal effects may not be covered at all when they are kept in below-ground rooms.


Who's required to have flood insurance?

Whether you live inside or outside of a high-risk flood area, if you own property, you should consider purchasing flood insurance for the protection and peace of mind. However, many property owners, particularly those in a high-risk flood areas, may be required to have flood insurance.

  • Do you have a mortgage? Home and businesses in high-risk flood areas with government-backed mortgages are required to have flood insurance. While flood insurance is not federally required if you live outside of the high risk area, your lender still may require you to have flood insurance.

  • Have you received disaster assistance? If you live in a high-risk flood area and have received federal disaster assistance, you typically are required to maintain flood insurance in order to be considered for any future federal disaster aid.


In conclusion, flood insurance is something all property owners should seriously consider. Floods are unpredictable and can happen anywhere, causing significant and costly damages. That's why it's important to explore your flood insurance options and get coverage that works for you. Whether you opt for the National Flood Insurance Program (NFIP) or private flood insurance, it's vital to ensure that your coverage plan fits your property's specific needs. Don't wait until it's too late.


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