Flood Insurance: It’s Worth It
Just one inch of flood water can cause more than $25,000 in damage to a home. But with flood insurance, your clients will have peace of mind that they’re protected.
What’s covered with flood insurance.
Agents play a crucial role in helping clients understand what is and isn’t covered with flood insurance.
Contents and building coverage must be purchased separately (for the Preferred Risk Policy, there's an option for combination coverage), and there are always separate deductibles. Building coverage covers the physical structure of the property, while contents coverage insures the contents of the property, including personal belongings, appliances, and other valuables.
- The electrical and plumbing systems
- Furnaces, water heaters, heat pumps, and sump pumps
- Refrigerators, cooking stoves, and built-in appliances such as dishwashers
- Permanently installed carpeting over an unfinished floor
- Permanently installed paneling, wallboard, bookcases, and cabinets. The damage must be directly caused by flood water. Cabinets that were not damaged by flood water are not covered, even if they match cabinets that were damaged by flood water
- Window blinds
- Foundation walls, anchorage systems, and staircases attached to the building. There is an exclusion for “loss caused directly by earth movement even if the earth movement is caused by flood”
- A detached garage used for limited storage or parking. Up to 10 percent of the building coverage limit can be used, but will reduce the total amount of building coverage available
- Cisterns and the water in them
- Fuel tanks and the fuel in them, solar energy equipment and well water tanks and pumps
- Personal belongings such as clothing, furniture, and electronic equipment
- Portable and window air conditioners (easily moved or relocated)
- Portable microwave ovens and portable dishwashers
- Carpets not included in building coverage (carpet installed over wood floors, etc.)
- Laundry washers and dryers
- Certain valuable items such as original artwork and furs (up to $2,500 per item)
- Food freezers and the food in them (but not refrigerators)
- Damage caused by moisture, mildew, or mold that could have been avoided by the property owner or which are not attributable to the flood
- Damage caused by earth movement, even if the earth movement is caused by flood
- Additional living expenses, such as temporary housing, while the building is being repaired or is unable to be occupied
- Loss of use or access to the insured property
- Financial losses caused by business interruption
- Property and belongings outside of an insured building such as trees, plants, wells, septic systems, walks, decks, patios, fences, seawalls, hot tubs, and swimming pools
- Currency, precious metals, and valuable papers such as stock certificates
- Most self-propelled vehicles such as cars, including their parts
Additionally, the cause of the flooding matters. For example, damage caused by a sewer backup is only covered by flood insurance if the backup is a direct result of flooding; the damage is not covered if the backup is caused by some other problem.
For a more complete list of what is and isn’t covered, review the Summary of Coverage guide.
A coverage limit is the highest amount a policy will pay for a covered loss. If your client has damage or losses over the amount of their policy limit, your client is responsible for those costs.
The National Flood Insurance Program (NFIP) offers the following maximum limits for most flood insurance policies:
With building coverage, you can insure your client’s residential building's structural elements up to $250,000, or your non-residential building at up to $500,000.
How much will flood insurance cost?
Flood insurance premiums vary depending on factors such as the construction date and flood risk of the property.
You should encourage clients to get a quote for both building and contents coverage. In most cases, they are separate coverages with separate deductibles.
Under Risk Rating 2.0: Equity in Action, risk will be identified more robustly by leveraging FEMA mapping data and FEMA-produced models and tools in combination with industry standard commercial catastrophe models to develop rating variables, including flood types, distance from a flooding source, frequency of flood, elevation, and the cost to rebuild a property.
NFIP flood insurance rates do not differ from company to company or agent to agent. All policy premiums include certain fees and surcharges, so inform your clients about these when discussing a price quote.
What is a moderate- to low-risk flood area?
Areas of moderate or minimal flood hazards are shown as B, C, X on a FEMA flood map. Areas designated as AR and A99 on a flood map indicate areas that are behind a levee currently under construction or repair.
FEMA’s flood map data informs the catastrophe models used to develop rates under Risk Rating 2.0: Equity in Action. Flood Insurance Rate Maps (FIRMs) will continue to be used for mandatory purchase requirements, building code requirements, and floodplain management requirements, as they have always been the backbone of those programs.