Flood insurance is a type of property insurance that covers a dwelling for losses sustained by water damage specifically due to flooding caused by heavy or prolonged rain, melting snow, coastal storm surges, blocked storm drainage systems, or dam failure. In many places, a flood is considered a major event, and the damage or destruction it causes are uncovered if you do not get supplemental insurance.
HOW FLOOD INSURANCE WORKS:
A type of catastrophe insurance, a flood insurance policy is different than the basic hazard insurance coverage contained in a homeowners insurance policy. Standard homeowners insurance covers interior water damage due to a burst pipe, or weather events like tornadoes and rainstorms. However, it generally doesn't cover destruction or damage caused by floodwaters. Property owners who live in an area prone to this sort of natural disaster usually need to get special coverage.
Flood insurance basically works just like other insurance products: The insured (the home- or property owner) pays an annual premium based on the property's flood risk and the deductible they choose. If the property or its contents are damaged or destroyed by flooding caused by an external event (rain, snow, storms, collapsed or failed infrastructure), the homeowner receives cash for the amount of money required to repair the damage and/or rebuild the structure, up to the policy limit. Unlike a standard homeowners policy, flood insurance requires that a policyholder buy separate policies to cover a dwelling and its contents. A separate coverage rider is needed to cover sewer backup if the backup was not caused by the rising floodwaters.
THE COST OF FLOOD INSURANCE
To determine your policy cost your agent will look at things like the location and structure of your home—how near it is to a body of water, and its elevation—as well as the sort of coverage (replacement cost value or actual cost value) you have selected. Factors such as the flood zone designation, age of the property, and the number of floors can all impact pricing. A Preferred Risk Policy (a lower-cost flood insurance policy) provides both building and contents coverage for properties in moderate-to-low risk areas for one price. As a result, annual premiums can vary widely.
BUYING FLOOD INSURANCE
When buying flood insurance, you should know that:
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 insurers have begun offering excess flood policies, intended to provide water damage protection to homeowners over and above the coverage provided by the NFIP policies.
What if I don't have flood insurance and there's a flood?
Having a flood insurance policy is way to protect your assets most fully 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, these loans must be paid back, which means you're still liable for the entire cost of your damages or losses.