In our neck of the woods (western Arkansas) flooding is an all-too-real occurrence that affects many families and businesses. This past spring, the damage from floods in our community was astonishing. Some recovered better than others, and some will not recover at all. Before we make it back around to our next spring storm season, there is something you need to know about (if you don’t already) for the consideration of protecting all that you hold dear – Flood Insurance.
Ninety percent of all natural disasters in the U.S. involve flooding. Your homeowners policy does not cover flooding so, regardless of your area’s risk level, it’s wise for you to learn about flood insurance so you can make an informed decision.
According to the Federal Emergency Management Agency (FEMA), floods (including inland flooding, flash floods and flooding from storms) occur in every region of the United States.
If you are moving into a new home or business, or you if you are unaware of the place you currently inhabit, ask your mortgage lender, your local officials or your insurance agent if the location has been known to flood. The National Flood Insurance Program (NFIP) can also provide flood risk information about your area.
Even if you don’t live in a high risk area, you are in potential danger of loss from a flood because 20% of all flood claims are filed in low to moderate flood risk areas. That means you should know how to prepare for the possibility of a flood, know your flood insurance options and consider obtaining protection.
Flood Insurance Basics:
Flood insurance is different from other insurance policies. The following* is basic information about this type of protection:
- Floods are not covered under homeowners and renters policies. Only a specific flood insurance policy will cover flood related losses.
- Most flood insurance is administered through the federal government. Homeowners, renters and business owners can purchase flood policies from an insurer under contract with FEMA. The federal flood insurance program is available where the local government has adopted adequate flood plain management regulations under the NFIP. Many communities participate in this program.
- Flood insurance covers direct physical losses from floods and losses resulting from flood related erosion caused by waves or currents of water exceeding anticipated cyclical levels and accompanied by a severe storm, flash flood, abnormal tide surge or similar situations that result in flooding.
- Flood insurance coverage for the structure and contents of the home are sold separately. Buildings are covered for replacement cost, but coverage for personal property is available on an actual cash basis only.
- The maximum flood insurance coverage amount is $250,000 for the structure of the home and $100,000 for the contents of the home. (“Excess” coverage over and above the maximums that are available from NFIP is offered by private insurers.)
- Flood losses for cars are covered under the optional, comprehensive portion of the standard auto insurance policy.
- Commercial flood insurance is available from NFIP. It provides up to $500,000 of coverage for your building and up to $500,000 for its contents. You can also purchase what’s called “excess” insurance coverage to rebuild properties valued above those limits.
Buying Flood Insurance – What You Need to Know*:
- It’s fairly easy to purchase. Federal flood insurance policies can be purchased directly from an insurance agent. Nearly 100 insurance companies provide and service NFIP policies.
- It requires a waiting period. There is a 30-day waiting period before a flood insurance policy takes effect, so don’t wait until the last minute to purchase.
- It can be augmented with “excess” insurance. The NFIP policy maximums are inadequate to fully cover some people’s assets so a growing number of private insurance companies have started to offer excess flood policies, which are intended to provide water damage protection to homeowners over and above the coverage provided by the NFIP policies.
Having flood insurance is a one of the best ways to protect your asset from the cost of flood damages and loss. Without insurance, relief from floods primarily comes in the form of loans. If your community is declared a disaster area, no-interest or low-interest loans are often made available by the federal government as part of the recovery effort. However, as these loans must be paid back, you are liable for the entire cost of your losses.
If you live by water, are in a designated flood area, or experience storms, it’s worth the effort to research your flood potential and look into ways to protect you and your family. For more information about flood insurance for your home and/or business, reach out to your insurance agent. You can also find a lot of great information at FloodSmart.gov.
Be informed, be protected!
*from “Facts about flood insurance” www.iii.org/article/facts-about-flood-insurance.