What Flood Insurance Does Not Cover
|By| March 15, 2023|
Did you know that damage caused by floods is typically not covered under most standard homeowners insurance policies? In fact, if you reside in an area with a high risk of flooding, your mortgage lender will likely require you to purchase flood insurance through FEMA's National Flood Insurance Program (NFIP) and associated programs provided by your insurance professional. However, it's worth noting that over 20% of flood insurance claims come from areas that are not considered high-risk for flooding, which is why it's recommended that homeowners consider obtaining coverage regardless of their location.
In this article, we will provide an overview of what is and isn't covered under a standard NFIP flood insurance policy. Additionally, we will examine how much coverage is truly needed to help cover the cost of rebuilding a home under current market conditions to help you determine whether you have sufficient flood coverage for your property.
Flooding Costs and Prevention
According to FEMA, most homeowners in low-to-moderate-risk areas pay less than $400 per year for flood insurance coverage. However, the average annual premium for flood insurance is approximately $700, with homeowners in high-risk areas paying significantly more.
FEMA's NFIP is the primary source of residential flood insurance coverage in the United States. Although the federal government underwrites the insurance, it can be obtained through most insurance agents.
If you're thinking about purchasing flood insurance, FEMA provides information on what is covered and what is not covered. It is important to note that there is a 30-day waiting period after purchasing the policy before coverage takes effect.
What Is Covered by Standard Flood Insurance?
Flood insurance policies generally offer coverage for two types of property: the structure of your home and its contents. This distinction is important because each type has its own deductible and limit. It is worth noting that flood insurance policies do not extend coverage to the land on which your home is situated.
Building coverage includes items such as electrical and plumbing systems, furnaces, water heaters, and kitchen appliances, including dishwashers and refrigerators. It also covers permanently installed fixtures like carpeting, cabinets, bookcases, and window blinds. The policy extends to foundation walls, anchorage systems, staircases, detached garages, fuel tanks, well water tanks, pumps, and solar energy equipment.
Contents coverage, on the other hand, covers personal belongings such as clothing, furniture, and electronic equipment. The policy also covers curtains, washers and dryers, portable and window air conditioners, microwave ovens, and carpets that are not included in the building coverage, such as those installed over wood floors. It also covers valuable items such as original artwork and furs up to $2,500.
What Flood Insurance Does Not Cover
The amount of coverage you need correlates with the cause of flooding. Specifically, flood insurance policies cover losses that result directly from flooding. This is defined as an overflow of water onto land that is usually dry, which affects at least two acres of land or two properties. It's important to note that damage caused by a sewer backup is covered only if it results directly from flooding. If the backup is not directly caused by flooding, the damage is not covered by flood insurance but may be covered by an endorsement to your homeowners policy
As per the NFIP, flood insurance does not cover damage caused by:
- Damage caused by moisture, mildew, or mold that could have been prevented by the property owner, or that is not directly related to the flood
- Damage caused by earth movement, even if it was caused by the flood
- Additional living expenses, such as temporary housing, while the building is being repaired or is uninhabitable
- Loss of use or access to the insured property
- Financial losses caused by business interruption
- Property and belongings that are located outside of an insured building, including 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
Federal flood insurance coverage is limited to $250,000 per building and $100,000 for contents; however, you can obtain a policy with lower limits.
Deductibles for your dwelling and contents are separate. Policies covering nonresidential structures and their contents can have higher coverage limits.
Can Excess Flood Insurance Cover the Gap in Coverage?
One of the significant advantages of obtaining excess flood insurance is the enhanced coverage it offers in the event of a flood. With excess coverage, policyholders can receive up to $5 million to rebuild their homes or businesses after a flood. Moreover, this type of coverage provides up to $2 million (in most states) to replace individual contents that exceed the limits set by the NFIP.
In addition to the standard coverage limits, excess flood insurance also provides financial assistance for the policyholders' living expenses to support them during the transition period.
If you are concerned about the risk of flooding and the expenses that may arise from rebuilding your home or business, then it may be worthwhile to consider obtaining excess flood insurance. However, the specific coverage limits and premiums for this type of policy will depend on various factors. We recommend speaking with an insurance agent to determine the best options for your needs.
The insurance pros at Cell Brokerage specialize in providing affordable and customized insurance options and superior service to our clients. We partner with a variety of insurance providers so you are presented with options that fit your needs (and budget). Contact us to get a quote by email or call (844) 440-4222 today.
Talk to an Insurance Pro
What Should Not Be a Part of a Risk Management Plan?
Effective risk management is crucial for businesses and corporations to safeguard their operations against potential threats. A comprehensive risk management plan can help companies prevent or minimize financial losses, reputational damage, and legal issues. However, there are certain elements that should not be included in a risk management plan.Read More
When Should You Use Personal Insurance vs. Commercial Insurance
If you’re an entrepreneur or a freelancer, then you know that managing risk is an important aspect of running a business, and one component of risk management is insurance. However, determining the appropriate type of insurance coverage can be quite an undertaking if you’re new to managing risk. This is especially true for entrepreneurs and freelancers who work from home and often use personal items for work-related tasks. It can be challenging to discern if additional commercial insurance coverage is necessary beyond personal insurance policies.Read More
Why Risk Management Is Important
Like everything else in life, running a business comes with risks. Risk management is a crucial aspect of any successful organization, yet many make the mistake of not taking it seriously. Businesses that take a passive approach to risk management, whereby potential risks are ignored or deemed insignificant, are at great risk in the event of an actual disaster.Read More
When Is Commercial Auto Insurance Required?
Operating a business can be stressful—as a business owner, you have a lot to be responsible for, whether it be the daily business operations or protecting your business from financial loss. One way you can safeguard your business is by purchasing commercial auto insurance, which is a crucial form of insurance for business owners who use vehicles as part of their daily operationsRead More
Car Insurance 101: Terms You Need to Know
In 2019, over half of the 12.15 million vehicles involved in collisions in the U.S. were passenger cars. When it comes to car insurance, it can be overwhelming to find the right policy to suit your needs, as there are many different terms to get familiar with. In this article, we’ll review 10 important terms you should know before signing up for a car insurance policy.Read More
Mastering the Fundamentals: Understanding the Four Concepts of Effective Risk Management
Understanding the four core concepts is crucial for effective risk management, which is a critical component of any organization’s success. These include identifying, evaluating, prioritizing, and controlling risks. These steps support businesses in locating potential risks, evaluating their effects, prioritizing their efforts, and taking the necessary measures to mitigate them. Understanding these ideas can help safeguard an organization’s assets.Read More
Why Is Life Insurance Important for the Self-Employed?
You may not realize it, but life insurance is an important part of being self-employed. Without it, your death could result in more than just the emotional toll it will take on those left behind. Here are a few reasons you should consider buying a policy.Read More
Top Tips to Protect Your Business from Common Liability Risks
Running a business comes with its own risks. Read on to learn how you can protect your business from the liabilities that may arise from such risks.Read More
4 Examples of Commercial Risk
When running a business, risk is one of those words that you simply cannot avoid. Not understanding the risk you face in your business could be preventing you from acquiring that sizable contract or that ideal client. There are all sorts of risks that businesses take on and understanding them is vital for any business owner. In this article, we’ll look at some of the most typical business risks and how you can protect your company from them.Read More
Liability Insurance: What It Is and How It Works?
Choosing an appropriate insurance policy for your business from the sea of options available can be quite overwhelming. Identifying the significant risks your company might face and deciding on the right policies requires diligence. Taking care of liabilities and associated risks is also an essential part of protecting your business. Liability is a term that means duty, obligation, or responsibility. It grows with the business, and depending on the type of business; you will need different insurance policies.Read More