The issue of flood insurance can be confusing.
Many people don’t know when or if they need it when they are in the process of purchasing a new home. To bring a little clarity, let’s dive into the 7 most commonly ask questions about flood insurance.
Do I Need Flood Insurance?
Against what most people would believe, this answer is almost always “yes”. The definition of flood in the insurance world is way different than what most people would think. According to the National Flood Insurance Program, the definition of flood is “an excess of water on land that is normally dry, affecting two or more acres of land or two or more properties”.
In short, anywhere it can rain, it can flood.
If you live in a flood zone, also called a Special Flood Hazard Area (SFHA), your mortgage company may require you to have flood insurance. This is especially true if you have a government backed mortgage.
Even if you are not required to purchase flood insurance, it is still strongly worth considering. While your area may have never flooded before, things like broken water mains, melting snow, strong storms, poor drainage systems or construction in your neighborhood can result in flooding. In the 2010 floods that occurred in the Nashville area where over 13 inches of rain fell in 36 hours, many people were taken by surprise. Hundreds of properties not located in a flood zone were affected, causing over $2 billion in damage.
According to NFIP, over 20% of claims of all NFIP claims are outside of high risk areas. You can receive lower cost coverage if you live in a low or moderate-risk flood area.
Does My Homeowners Insurance Cover Flood?
For most insurance policies, the answer is “no”. A standard homeowner’s insurance policy specifically excludes water damage caused by flood, surface water, tidal water, waves, or an overflow of any body of water. Many policies also exclude water that comes in below the surface of the ground. Problems like this are very common in structures with a basement.
What Does Flood Insurance Cover?
There are two types of coverage on a flood insurance policy, building and contents.
Building coverage is limited to $250,000 if you purchase your policy through the NFIP. If you purchase through a private insurer, the limit can be much higher.
Your building coverage will cover things like:
- Foundations, walls, and staircases
- Electrical and plumbing systems
- Water heaters and furnaces
- Permanently installed carpeting, paneling, and bookcases
- Refrigerators, stoves, and built-in appliances
Contents coverage with the NFIP is limited to $100,000. Again, if you purchase with a private insurer, the limits may be higher.
Contents coverage will protect things like:
- Personal belongings – clothing, electronics, furniture, etc.
- Washers and dryers
- Carpets not included in building coverage
- Portable air conditioners
- Some valuable items up to a specified limit
What Does Flood Insurance NOT Cover?
If damage to the property is not caused directly by flooding (per the definition above), it will not be covered by a flood insurance policy. For example, if the sewer backs up into your home and it is not a direct result of flooding, it will not be covered. (This is when a water and sewer backup endorsement would be handy!)
Other things that are not covered include:
- Damage caused by earth movement, even if caused by flood
- Additional living expenses, such as temporary housing, while the building is being repaired
- Property that is outside the building such as swimming pools, hot tubs, fences, decks, patios, plants and trees
- Currency or precious metals
- Most vehicles such as cars
How Much is Flood Insurance?
In Tennessee, the average yearly cost for flood insurance is $861. The cost will vary between NFIP flood policies and insurance purchased from private insurers. Only 1% of homes in Tennessee have flood insurance.
Some factors that play into your flood insurance rate are your flood zone, building type and age, type of foundation (crawlspace, basement, elevated, etc.), and location of your contents (i.e. Do you have a significant amount of contents below ground level?). The greater the risk of flooding, the higher your rate will be.
How Do I Get Flood Insurance?
The easiest way to get flood insurance is to contact an independent insurance agent. Most will be able to quote your home with several different companies to get you a competitive rate.