Given the record amount of rainfall and floods experienced here in Texas in 2016, many people have learned the expensive lesson that standard homeowners and renter's insurance don't cover cover flood damage! Flood coverage must be purchased as a separate policy!
The NFIP (National Flood Insurance Program) provides coverage for up to $250,000 for the structure of the home and $100,000 for personal possessions. The NFIP policy provides replacement cost coverage for the structure of your home, but only actual cash value coverage for your possessions.
Flood insurance is available for renters as well as homeowners and you'll definitely need flood insurance if you live in a designated flood zone. But flooding can also occur in inland areas and away from major rivers. Consider buying a flood insurance policy if your house could be flooded by an overflowing creek or pond or water running down a steep hill. Don’t wait for a flood season warning on the evening news to buy a policy—there is a 30-day waiting period before the coverage takes effect.
'Excess' flood insurance is also available for those who need additional insurance protection over and above the basic policy limits or whose community does not officially participate in the NFIP. Depending on the amount of coverage purchased, an excess flood insurance policy will cover damage above the limits of the federal program on the same basis as the federal program—replacement cost for the structure and actual cash value for the contents.
Did you know...
- In the past 5 years, all 50 states have experienced floods or flash floods.
- Everyone lives in a flood zone.
- Homeowners' insurance does not cover flood damage.
- If you live in a Special Flood Hazard Area (SFHA) or high-risk area and have a Federally backed mortgage, your mortgage lender requires you to have flood insurance.
- Just a few inches of water from a flood can cause tens of thousands of dollars in damage.
- Flash floods often bring walls of water 10 to 15 feet high.
- A car can easily be carried away by just two feet of rushing water.
- Hurricanes, winter storms and snow melt are common (but often overlooked) causes of flooding.
- New land development can increase flood risk, especially if the construction changes natural runoff paths.
- Federal disaster assistance is usually a loan that must be paid back with interest. For a $50,000 loan at 4% interest, your monthly payment would be around $240 a month ($2,880 a year) for 30 years. Compare that to a $100,000 flood insurance premium, which is about $400 a year ($33 a month).
- A Preferred Risk Policy provides both building and contents coverage for properties in moderate- to low-risk areas for one low-price.
- In most cases, it takes 30 days after purchase for a policy to take effect, so it's important to buy insurance before the storm approaches and the floodwaters start to rise.
- In a high-risk area, your home is more likely to be damaged by flood than by fire.
- Even though flood insurance isn't federally required, anyone can be financially vulnerable to floods. In fact, people outside of mapped high-risk flood areas file over 20-percent of all National Flood Insurance Program flood insurance claims and receive one-third of Federal Disaster Assistance for flooding.
- From 2005 to 2014, total flood insurance claims averaged more than $3.5 billion per year.