Flood insurance makes sense once you realize that floods are the #1 natural disaster in the US. Right now everyone's focused on the flooding caused by Hurricane Sandy's storm surge, but there are lots of other reasons why your home might get flooded. We'll review these as most homeowners focus on saving money versus understanding their insurance options. This article focuses on flood insurance starting with an overview of the National Flood Insurance Program (NFIP) and what it covers.
It's important to understand flood insurance, and why it might be good for your home as most homeowners focus simply on saving money. When we bought our condo a quarter mile from the NH coastline, we learned our condo didn't require flood insurance (with about a foot to spare) so we didn't buy it. We're reviewing our decision now because Hurricane Sandy's damage to New Jersey, could easily have happened in New Hampshire.
In high risk areas (insurance required if mortgages from federally regulated or insured lenders), there is a 25% chance of flooding during a 30 year period (mortgage). You might think your home won't get flooded if you don't live along the coast or near a river. In fact, flooding is the #1 natural disaster in the US. Flooding can happen almost anywhere — yes, hurricanes and tropical storms but also heavy rains and spring thaw, flash floods and mud flows, dams and levees can break and new development alters water runoff patterns causing flooding where it's never happened.
That's why Congress created the National Flood Insurance Program (NFIP) in 1968, to insure property owners could buy flood insurance as most homeowner policies DO NOT cover flooding. NFIP flood insurance is available to homeowners, renters, and business owners if their community participates in the NFIP, as these communities agree to adopt and enforce ordinances that meet or exceed FEMA requirements to reduce the risk of flooding.
Sandbags, supplies and labor up to $1,000 to protect insured buildings from flooding.
The insured building, foundation, stairways, staircases, elevators and dumbwaiters, unpainted drywall and ceilings, including fiberglass insulation.
Well water tanks and pumps, cisterns and the water in them; oil tanks and the oil in them, natural gas tanks and the gas in them; pumps and/or tanks used in conjunction with solar energy.
Electrical and plumbing systems and required utility connections, furnaces, heat pumps, central air-conditioning equipment and water heaters.
Refrigerators, cooking stoves, and built-in appliances likes dishwashers.
Personal belongings (not below grade) like clothing, furniture, curtains and electronic equipment.
Portable and window air conditioners, portable microwaves and dishwashers, washing machines and dryers.
Carpeting not already included in property coverage.
Basement improvements like finished walls, floors or ceilings, or personal belongings kept in the basement, such as furniture and other contents.
Damage caused by moisture, mildew or mold that could have been avoided by the property owner.
Currency, precious metals and valuable papers such as stock certificates.
Property and belongings outside the insured building, i.e. trees, plants, wells, septic systems, walks, decks, patios, fences, seawalls, hot tubs and swimming pools.
Flood insurance coverage is available for up to $250,000 in damages for homes and individual condominium units (condo associations have a different type of policy), and up to $100,000 in losses if you purchase contents coverage. When buying flood insurance, you'll pick from one of 2 common reimbursement methods (replacement cost or actual cash value), similar to regular homeowners insurance. There is a 30 day waiting period on new flood insurance policies (exception may exist when required to obtain a new mortgage).
The average premium for a one year is $600 according to the National Flood Insurance website , but remember that's an average of people in high risk areas that are required to carry flood insurance, and those who do so voluntarily (premiums can be as low as $129). It sounds like a lot of money but when you realize the average residential flood claim (between 2007 and 2011) was almost $30,000, it might seem worthwhile.
Flood Insurance Frequently Asked Questions.
Recent article, http://science.time.com/2013/07/17/the-costs-of-climate-change-and-extreme-weather-are-passing-the-high-water-mark/?hpt=hp_bn18 explains why today's flood insurance motivates the wrong behaviour.