5 Things You Need to Know About Flood Insurance

The following article was originally posted by Bell Bank, and we thought it was worth re-posting considering spring 2020 is quickly approaching and time is running short to prepare for the highly likely spring flooding soon to come.

It’s true that not all homeowners are required to have flood insurance. But a harder truth is that all homeowners (and many renters) probably should have it.

Homeowners’ insurance does not typically cover damage caused by heavy rain, rising rivers or flooding. Even if you don’t live in a flood zone – or if you live in an area with a diversion or other flood-control measures – you could be at risk. Snowmelt, rapid rain accumulation, poor drainage systems and broken water mains can all lead to flooding. In fact, more than 20% of all flood insurance claims were by people outside of high-risk flood zones, the Federal Emergency Management Agency (FEMA) reports.  

The good news is flood insurance usually costs less if you don’t live in a high-risk area. When considering cost, keep in mind, FEMA says just 1 inch of water can cause $25,000 worth of damage to your home.

When considering flood insurance, here are 5 things you need to know:

1. There are 2 types of coverage. The National Flood Insurance Program (NFIP) offers building property coverage of up to $250,000 and personal property coverage of up to $100,000. You should purchase both. 
2. Flood insurance is not a valued policy or a guaranteed replacement cost policy. This means flood insurance pays the replacement cost or actual cash value of actual damages up to the policy limit. Flood insurance does not pay more than the policy limit. 
3. There is a 30-day waiting period before the coverage takes effect – unless you are required to have flood insurance by a lender on a new mortgage. 
4. Flood insurance coverage is limited in areas below the lowest elevated floor and in basements (including walk-out basements). Things like foundation walls, central air conditioners, fuel tanks and furnaces are covered under building property coverage. Personal property coverage will cover washers and dryers, portable and window air conditioners, food freezers and the food in them. But the following items are NOT covered under either building property or personal property coverage when in areas below the lowest elevated floor and in basements:
   
   • Most personal property (including refrigerators and the food in them)
   • Paneling
   • Bookcases
   • Window treatments
   • Carpeting and other floor coverings
   • Drywall for walls and ceilings and walls and ceilings not made of drywall
   • Staircases and elevators (in certain cases) 
     
5. If you have been offered a FEMA mitigation grant and refuse it, your insurance premium could rise by 150%.

Many people mistakenly think federal disaster assistance will pay for flood damages, but it’s only available after a Presidential Disaster Declaration (which does not happen for most floods) and federal disaster aid is typically a low-interest loan that must be repaid (along with any mortgages or loans you’ve already taken out for your property.)

Again, thanks to Bell Bank for sharing this important information.