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I own a home, do I need flood insurance?

Updated: Apr 27, 2020

Finding out after a flood that you are at risk for flooding is abysmal. Finding out that your homeowners' insurance does not cover flooding is even worse.

No home is entirely safe from potential flooding. One little inch of water in your home could cost you $25,000 or more in damages; flood insurance can be the difference between recovery and financial devastation. Flood insurance protects structures and its contents from damage caused by a flood. A flood can be defined as a temporary situation where 2 or more acres of normally dry land becomes inundated by mudflow or water.

If you own a home, you should take steps to protect your home, family, and financial security when flooding is predicted in or around your area. Please take this advice.

Purchasing flood insurance is by far the best way to protect your home and belongings from flood damage.

Steps to take to be ready for flooding:

  • Get flood insurance.

  • Know your flood risk.

  • Take a household inventory.

  • Store important documents.

  • Store nothing of importance in the basement

Flood maps

Flood maps show a community's risk of flooding. Specifically, flood maps show a community's flood zone, floodplain boundaries, and base flood elevation. Property owners, insurance agents, and lenders can use flood maps to determine flood insurance requirements and policy costs.

Because your flood risk changes over time, the National Flood Insurance Program (NFIP) and the Federal Emergency Management Agency (FEMA) work with communities across the country to identify and map flood risk on an ongoing basis.

On FEMA maps, high-risk flood areas face the highest risk of flooding and start with the letters A or V. If you own a property with a mortgage, it is required to get a flood insurance policy as a condition of that loan if you are located in a high-risk area.

In contrast, FEMA maps indicate moderate to low-risk flood areas as the letters B, C, and X. The risk of being flooded is reduced in these areas, but not completely removed. One in four flood insurance claims come from moderate to low-risk flood areas.

Property owners in moderate-to low-risk areas are eligible for lower-cost flood insurance, known as Preferred Risk Policies (PRPs). Premiums start at less than $325 a year.

What Does Flood Insurance Cover?

Your home insurance policy addresses many types of water damage claims. These claims usually are reported as burst pipes, accidental overflows, spills, failed water heaters, or appliances. None of these are considered floods. Remember, the water must touch the outside ground or pavement first, which makes the concept of flooding a bit easier to understand. A flood policy is explicitly designed to cover overland flooding. And, a stand-alone homeowner's insurance policy won't cover the water damage.

The coverage extends to the interior of your home. If you are worried about flooding, avoid storing anything of value below ground level if worried about flooding. Basement or crawlspace coverage is limited.

A breakdown of what is covered:

  • Plumbing and Electrical systems

  • Furnaces and water heaters

  • Appliances, dishwashers including refrigerators, and stoves.

  • Permanent installations, like paneling, carpeting, wallboard, cabinets, and bookcases

  • A detached garage (subject to limitations)

  • Foundation walls

  • Fuel tanks and well water tanks

  • Solar energy equipment

  • Personal belongings unless they are stored outside or basement.

  • Washing machines or dryers

  • Food freezers and their food contents

  • Curtains and lose carpets

  • Clothing, electronics, and furniture

  • Portable appliances, air conditioners, dishwashers or microwave ovens

Precious metals, vehicles, and valuable papers are all excluded from coverage.

All contents inside the home are paid at an actual cash-value(a depreciated amount based on age).

If the home needs to be replaced, it is paid at replacement cost- value(based on the cost of rebuilding the property).

Cost of Flood Insurance

...about $700 per year. It is priced according to risk, which is based on location. FEMA determines the risk. They use a sophisticated system that compartmentalizes flood zones with letter codes to group properties according to their risk of flooding. A property's elevation or lack of is a huge part of that risk.

Flood insurance is costly if you are in a low-lying area or near water that is prone to flooding.

The takeaway is that Mother Nature is not predictable, and more people should have flood coverage.

How Much Coverage is needed

The average flood insurance claim is $30,000. Many companies use a strategy called coinsurance. Meaning, you will be required to insure the home to at least 80% of its rebuild value to get full coverage.

Here is an example. If your home costs $200,000 to rebuild, but you only purchase insurance for $100,000, you can expect your insurer to pay 50% of your claim up to your policy limit. Also, the deductible is subtracted from the claim payment.

For simplicity, match your flood insurance coverage limits to those on your home insurance policy.

Why should you always renew your flood insurance policy?

  • It saves you money or it can cost you money

  • A coverage lapse leaves you vulnerable to unexpected flooding.

  • Your bank may require it.

  • You may miss out on future Presidential Disaster Assistance.


Steve Leach

CEO and Co-Founder of linqrs mobile app, The Most Clever Way to Shop for Insurance. Former Insurance Agency Owner, College and NFL football coach.

linqrs is downloadable in the Google Play and the App Store.

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