If you own or are contemplating buying a house in an area prone to flooding, you likely have a lot of questions. Will your policy cover flooding? Will all kinds of flooding be covered? And how is "flooding" defined, anyway?
With climate change and rising sea levels leading to increases in flooding, these questions are more urgent than ever (see 5 Ways Climate Change Can Affect Your Home Insurance Policy to learn more). This article gives a brief overview of these issues.
What Counts as a Flood?
The National Flood Insurance Program's (NFIP) regulations define a flood as "a general and temporary condition of partial or complete inundation of normally dry land areas from the overflow of inland or tidal waters or the unusual and rapid accumulation of runoff or surface waters from any source."
So, whether the water comes from the sea, a river, an estuary, a lake, or even just from an exceptionally heavy rainfall, what makes a flood a flood is the inundation of normally dry land. An unusually high tide that causes the water to spread to your home and a heavy rain that causes a lake to overflow its banks and spread to your home have different types of causes but are, nevertheless, both considered floods.
Does Homeowner's Insurance Cover Flood Damage?
When it comes to water damage, whether it is covered by a homeowner's insurance policy or not really depends on what caused it. Typically, the cause of the damage will only be covered if it is sudden and accidental. A malfunctioning appliance, for instance, will be deemed an accidental event and the policy is likely to issue compensation for the damage (see 5 Water Damage Home Insurance Scenarios: Are You Covered? for more details).
But flood damage, regardless of the source, is never covered under a standard policy.
Do I Need Flood Insurance?
The FEMA website features a Flood Map Service that can help you determine whether you property is located in a flood zone.
If your property is in zones V and A, you will need flood insurance to secure loans. In B, C, and X, however, flood insurance isn't required. However, given that 25% of flooded properties are in low to moderate risk areas, if you live in zone B, you might want to buy it anyway
If you're a renter, don't assume that your landlord's flood insurance policy will cover your personal property—it won't. Renter's flood insurance is available, however, and the agent or broker you purchased your renter's insurance from will be able to help you find a policy.
As the name implies, floodplains are especially prone to flooding. These are land areas susceptible to inundation by flood waters from any source. They tend to be flat areas adjacent a main stream channel. When the banks overflow, a floodplain's topography provides a natural storage space for the excess water.
So, while coastal areas are obviously at greater risk of flooding, that doesn't make in-land properties immune to it. Make sure you properly assess your level of flood risk before deciding to do without flood insurance.
What Does Flood Insurance Cover?
While flood insurance can give you some important protection and some well-needed peace of mind, it's important to be aware that it has some serious limitations. Coverage for the physical structure of your house is limited at $250,000, and for personal possessions, it's $100,000. It also won't cover relocation expenses if you have to be housed somewhere else while your home is being repaired or rebuilt.
If you buy flood insurance through the NFIP, however, you can then buy excess insurance through private carriers. And if you are a renter, you will, of course, only need to buy insurance for your personal possessions and not the actual structure of the building you occupy.
If you do choose to purchase an insurance policy through the NFIP, be aware that there is a 30-day waiting period to buy coverage. So, don't wait until you feel like a threat is imminent; buy a policy well before disaster strikes so you don't find yourself without coverage when it's too late to do anything about it.
How Expensive Is Flood Insurance?
Costs vary significantly and they're on the rise. So, we can't really provide you with a concrete dollar figure. To find out the exact cost, you'll have to do your own research.
When you do start looking around, I highly recommend that you talk to at least two agents or brokers in your area before you get started. And don't just ask about the current cost; ask about the trends in the area: what did flood insurance cost five years ago? What does it cost now? What is it likely to cost in five years?
Do Your Homework
Whether you need flood insurance depends on a few factors, especially where your property is located. But don't discount it just because you live far from the coast; flooding is a possibility almost anywhere.
With costs being so variable, make sure you're not paying too much for too little coverage. Compare policies and do your homework before you buy.