Flood Insurance

Flood Insurance in the USA

Flood zones aren’t always located on the coastline, as one might expect. For example, the state of Texas. Nearly every major city in Texas is in a high-risk flood zone. Unfortunately, floods can happen anywhere. More than half of the homes flooded by Hurricane Harvey in 2017 were outside the designated flood zone, so it’s worth considering flood insurance even if you’re not required to buy it.

What is considered a flood by insurance companies?

A flood, in terms of insurance coverage, is defined as when groundwater covers at least two acres of land or two properties. Flood damage is usually caused by heavy, prolonged rain, melting snow, coastal storm surges, blocked stormwater drainage systems, or dam failures.

When a pipe bursts inside the house, we say, “My house is flooded.” However, this does not qualify as a flood because it’s not groundwater, and it doesn’t cover at least two properties or two acres of land.

Who needs flood insurance in America?

Homes and businesses in high-risk flood zones with a mortgage are required to have flood insurance. If you live in a high-risk flood zone and receive federal disaster assistance, including grants from the Federal Emergency Management Agency or low-interest loans from the U.S. Small Business Administration, you must have flood insurance to be considered for any future federal disaster assistance. Additionally, if your home is in a designated flood zone, your lender will require you to have flood insurance.

How to get flood insurance?

There are two ways to get flood insurance: through the National Flood Insurance Program (NFIP) and private flood insurance companies. If your building is in a high-risk zone, private insurance companies may not offer you flood insurance, and NFIP may be your only option.

What is the National Flood Insurance Program (NFIP) in the USA?

An NFIP flood insurance policy will cover your home up to $250,000 and up to $100,000 for personal belongings. The maximum coverage for businesses is $500,000 for building coverage and $500,000 for contents coverage. If you need more coverage for your building, there are additional flood insurance policies available.

Private flood insurance usually offers higher coverage, and monthly premiums are generally lower. Homeowners and commercial property insurance typically do not cover flood damage, but private flood insurance will pay claims regardless of whether there is a presidential disaster declaration.

What is not covered by flood insurance?

When purchasing a flood insurance policy, it’s important to understand its limitations and that it doesn’t cover all possible flood-related losses. There are several exclusions to consider to avoid unpleasant surprises in the event of a claim. For example, flood insurance does not cover additional living expenses if you cannot temporarily stay in your home due to flood damage. This means that if you need to rent a place or stay in a hotel during repairs to your home, these expenses will be your responsibility.

It is also important to note that flood insurance does not cover damage caused by mold or mildew that could have been prevented. If mold appears in your home as a result of flooding and it was due to a failure to take necessary protective or restorative measures, insurance will not cover these losses. Keep in mind that such damage can be severe and require significant expense to eliminate, so it’s wise to think ahead about how to prevent it.

Another key aspect is that flood insurance does not cover property located outside buildings. This means that objects such as trees, plants, wells, septic systems, decks, pools, and fences will not be insured against flood damage. If these elements of your property are damaged by flooding, you will not receive compensation for their restoration or replacement. This is particularly important for homeowners where such objects can play a significant role in the overall landscape design.

Additionally, vehicles are not included in a standard flood insurance policy. If your car is damaged by a flood, its restoration will only be covered by comprehensive auto insurance, not by a flood policy. This means that if you do not have an appropriate auto insurance policy, you will have to pay for the repair or replacement of the vehicle yourself.

Finally, it is important to remember that flood insurance does not cover incidents such as burst pipes or leaks from dishwashers or washing machines inside the house. This type of damage is usually included in a standard homeowners insurance policy, which covers various household problems. Therefore, if you experience a pipe burst or appliance leak in your home, you will need to refer to your homeowners insurance policy, not the flood insurance, to get compensation.

What do you need to know about flood insurance?

1. Most policies have a waiting period of about a month before they take effect, so don’t wait for an approaching storm before deciding to purchase flood insurance. There are exceptions, such as when buying a new home with a mortgage that requires flood insurance.

2. You can reduce your monthly insurance payment if the living area in your home is 13 feet above the base level. For example, if there is no living space on the first floor, there is a garage under the house, an elevator shaft, or the house is built on stilts.

How does private flood insurance differ from FEMA flood insurance in America?

Which is better: private flood insurance or the National Flood Insurance Program (FEMA)? The choice really depends on where you live, your flood risk, and the coverage you want.

Here are the biggest differences you need to know:

1. With FEMA, no matter how much your home is worth, you receive insurance compensation of no more than $250,000 for the house and no more than $100,000 for destroyed contents if your home is flooded.

2. FEMA insurance always pays you the actual cash value of the damage—how much your property was worth at the time of destruction, not how much you paid for it or how much it would cost to replace it.

3. Private policies are advantageous if your home is worth more than $300,000. You can choose higher coverage, even up to the full replacement cost of the property.

4. FEMA policies take effect in 30 days, while most private insurance policies take effect as soon as you pay your first premium.

Most flood insurance is carried out through the FEMA program, known as the National Flood Insurance Program.

How much does flood insurance cost in the USA?

Flood insurance works like other insurance products—you will pay an annual premium based on the flood risk of the property and the deductible. Factors such as flood zone, property age, and the number of floors can affect pricing, which is set by the National Flood Insurance Program. If your property or its contents are damaged or destroyed by flooding caused by an external event such as rain, snow, storms, or infrastructure collapse, as the property owner, you will receive money to cover the cost of repairs and/or restoration of the structure up to the policy limit.

What is a flood zone in insurance? How to check a flood zone?

How do you know if a property is in a flood zone?

The simplest way is to call your insurance company, for example, us. A broker, during the insurance review process, will do the checks and provide you with all the necessary information about the flood risks.

There are several websites where you can check whether a property is in a flood zone or not. You enter your address and see, for example, that your home is in a 5% annual flood risk zone. What does this mean? The information is written in scientific language without an explanation of the percentage and zone color. It’s hard to understand—whether this zone requires flood insurance or if it is recommended or if the flood risk is low.

Recovery after a flood can be quite difficult, and without additional financial assistance, it is hard to manage, as flood damage can be colossal.

Real-life examples of flood insurance in the USA

Example 1: Hurricane Harvey, Texas, 2017

Hurricane Harvey became one of the most devastating floods in U.S. history, flooding more than 300,000 homes in Texas. More than half of these were outside official flood zones. Many homeowners, believing they were safe and not having purchased flood insurance, found themselves unprotected against the enormous costs of recovery. At the same time, those who had policies through the National Flood Insurance Program (NFIP) were able to receive compensation that covered a significant portion of repair and restoration costs. This case demonstrated that floods can happen even in low-risk areas and that flood insurance can be a decisive factor in ensuring financial stability.

Example 2: Missouri Flood, 2019

In the spring of 2019, due to snowmelt and heavy rains, the Missouri River overflowed, causing devastating floods. Thousands of homeowners faced property loss, but many did not have insurance coverage since their property was in low-risk areas. Those who had private flood insurance policies were able to recover more quickly, receiving payouts that not only covered the damage but also allowed for additional work to strengthen homes against future natural disasters.

Example 3: Louisiana Flood, 2016

In 2016, an unexpected flood occurred in Louisiana, also affecting areas not designated as high-risk. As a result, more than 100,000 homes were flooded. Many residents did not have flood insurance because they did not expect to be at such risk. Those who had policies were able to compensate for significant losses and avoid a prolonged financial crisis. Subsequently, many of the affected, realizing the importance of insurance, took out policies for the future, even though their areas were not in high-risk zones.

Conclusions

These examples demonstrate that floods can occur in the most unexpected places, and the absence of insurance coverage can lead to significant financial losses. Flood insurance, whether through NFIP or private companies, plays a key role in protecting property and recovering after natural disasters. Regardless of where you live, it is important to consider the risk of flooding and be prepared for unforeseen situations by obtaining appropriate insurance. Contact us and we will help you choose the most optimal flood insurance and arrange it.