What Does Flood Insurance Cover?

What Does Flood Insurance Cover?

Published: June 17, 2013

To understand what flood insurance covers, you need to know three things first:

1. Standard homeowners insurance doesn’t cover flood damage at all. It’ll cover some damage from rain, but if your home is filled with water as a result of rising bodies of lakes, rivers, streams, and oceans, it won’t cover you.

2. The most common flood insurance is offered through the federally regulated program known as the National Flood Insurance Program (NFIP). It has two policies:

  • One that covers your actual home (building property) up to $250,000
  • One that covers your personal property up to $100,000

You can buy one or both.

Related: What happens if you need more than $250,000 worth of coverage? You need to get excess flood insurance, which is only offered by private companies, not the Feds.

3. You might have to buy it. If you’re taking out a mortgage on a property that’s in a high-risk zone (also called a Special Hazard Flood Area), your lender will require you to buy a policy in order to get the loan. If you just want to buy policy, you have to make sure your community participates in the national flood program. Flooding affects every state, so you’re probably eligible.

Related: Should You Buy Flood Insurance?

What the Federal Flood Insurance Program Covers

NFIP’s building property policy covers the cost to rebuild or the actual value of your home (whichever is less). That includes:

  • Your home and its foundation
  • Electrical and plumbing systems
  • HVAC equipment like air conditioning, furnaces, and water heaters
  • Kitchen appliances, including your refrigerator, stove, and built-ins such as your dishwasher
  • Permanently installed carpeting over an unfinished floor
  • Permanently installed wallboard, paneling, bookcases, and cabinets
  • Window blinds
  • Detached garages (limited to 10% of your home policy)
  • Debris removal
  • Water heater

The NFIP policy that covers your personal property will cover stuff like:

  • Clothing, furniture, and electronic equipment
  • Curtains
  • Window AC units
  • Portable microwaves and dishwashers
  • Carpets not covered by your building policy
  • Washer/dryers
  • Your freezer and frozen food
  • Up to $2,500 in valuables, such as art and furs

Note: Personal possessions claims are paid based on actual cash value — not what you paid for them.

What Isn’t Covered

Typically, if it belongs in a bank or safe deposit box, it’s not covered:

  • Precious metals
  • Stock certificates
  • Bearer bonds
  • Cash

Other items not covered:

  • Trees
  • Plants
  • Wells
  • Septic systems
  • Walkways
  • Decks
  • Patios
  • Fences
  • Hot tubs
  • Swimming pools
  • Boat houses
  • Retaining walls
  • Storm shelters
  • Temporary housing and other living expenses
  • Loss of income
  • Cars
  • Post-flood mold damage (more about insurance and mold here)
  • Sewer backups

Coverage is Limited for Basements

If you have a basement, you’ll have more risk because the NFIP limits coverage for basements, crawlspaces, or any living space where the floor is below ground level. Even a walkout basement won’t be covered for:

  • Bookcases
  • Window treatments
  • Carpeting, tile, and other floor coverings
  • Some drywall, depending on how far below ground level it is
  • Paneling
  • Walls and ceilings not made of drywall
  • Most personal property such as clothing, electronic equipment, kitchen supplies, and furniture

There’s a Limit to How Often You Can Collect

If you make four or more flood claims for more than $5,000 each, or two claims that, added together, cost more than your home, NFIP will “offer” you a grant to make your home less vulnerable to floods. If you refuse to take the grant money and make the improvements, your policy payments will probably increase substantially.

If a Flood Severely Damages Your Home

NFIP may give you $30,000 to use to raise, tear down, or move your home. That $30,000 gets added on to any other claim NFIP pays you. But the total still can’t go above $250,000.

How Much Does It Cost?

The average cost is about $600 for a one-year premium; your insurance company, which issues the policy, can give you a quote. Ultimately, the amount depends on such factors as the amount of coverage, deductible, the risk level of your flood zone, and the age of the building.

More About What Qualifies as a Flood

As mentioned earlier, regular homeowners insurance doesn’t cover floods. So when is damage considered to be caused by a flood?

  • Water has to cover at least 2 acres of land that’s normally dry, or has to have damaged two or more properties (one being your home).

Also, the water has to come from:

  • Overflowing inland or tidal waters
  • Unusual, rapid accumulation or runoff of surface waters from any source
  • Mudflow (that’s mud carried by a flow of water, creating a river of mud)

You’re also covered when shorefront land collapses or sinks due to waters above “anticipated cyclical levels.”

Water and seepage that comes from sewer or drain backups, or a sump pump that overflows is not considered a flood.


  • Don’t wait for an impending storm to purchase federal flood insurance. There’s usually a 30-day waiting period. Some private policies offer a 15-day waiting period.
  • Make an inventory of the possessions in your home to make filing a claim easier.





Should You Buy Flood Insurance?

Should You Buy Flood Insurance?

Published: June 19, 2013

If you have a mortgage on your home and you live in a high-risk flood zone, in most cases, your lender requires you to buy flood insurance.

However, if you live in a moderate- to low-risk zone, and your community belongs to the National Flood Insurance Program (most do), then you have the option of buying it.

If you’re in the latter category, your first question probably is, “How much does it cost?” Federal flood insurance can cost just a few hundred dollars or as much as $10,000 a year, depending on your risk factor.

Some other facts that can help you make up your mind:

Your Homeowners Insurance Doesn’t Cover Flood Damage

It only covers water falling from the sky. Once water touches the ground and enters your home, it’s a flood, and only flood insurance will pay for the damage.

For example, if a tree limb pokes a hole in your roof during a rainstorm, and rainwater damages your ceiling and floor, that’s covered by your homeowners insurance. But if heavy rain causes the creek in your neighborhood to overflow into your home, that’s covered only by flood insurance.

To be more precise, the National Flood Insurance Program uses this definition of a flood:

A general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties (at least one of which is your property) from overflow of inland or tidal waters, from unusual and rapid accumulation or runoff of surface waters from any source, or from mudflow.

Everyone Lives in a Flood Zone

It’s just a matter of how much risk of flood there is. The NFIP can tell you your home’s exact risk of flooding. But in a nutshell, zones A and V are high risk areas. Moderate- to low-risk areas are zones B, C, and X. If you’re in zone D, the risk isn’t clearly known because it hasn’t been mapped yet. But you still can purchase flood insurance. The zones are used to help determine policy rates.

More Than 20% of Flood Insurance Claims Come From Moderate-to-Low Zones

That’s 1 out of 5. And that’s not counting homeowners who weren’t insured and, therefore, couldn’t file claims. No one knows how many uninsured there are, although only 18% of homeowners have flood insurance.

You Can’t Count on Government Aid

Government aid comes largely in the form of loans, which you will have to repay. Before you can even qualify for a loan, your area has to be declared a federal disaster area, and federal disaster assistance is declared in less than half of all flooding events.

The Average Flood Claim is $30,000

But if you live where the water rises so high that emergency responders have to cut roof holes to rescue people, your potential flood loss could be quite a bit higher.

Cost of damage to a 2,000-sq.-ft. home by 6 inches of floodwater:

Finished floor, wood, carpeting $15,870
Doors, base trim, windows $2,150
Electrical, plumbing $320
Cleaning $2000
Kitchen and bath cabinets $4,500
Appliances $180
Washer, dryer $150
Repairs to furnace/AC $270
Bedroom furniture $1,800
Kitchenware and food $330
Living room furniture $2,700
Computer accessories $1,100
Media equipment $150
Accent furniture and accessories $450
Personal items $650
Total $39,150
1,000 sq. ft. home is $20,150

If You Decide You Want to Purchase Flood Insurance

To get an idea of how much coverage you’ll need, create a home inventory and then estimate the cost of repairing or rebuilding your home. Together, those two figures are your total potential loss.

A federal flood policy would cover rebuilding costs up to $250,000. You can also get a NFIP to cover up to $100,000 in possessions. One or both of those.

What Flood Insurance Covers

If your home would cost more than $250,000 to rebuild, you have to buy a private flood insurance policy called “excess coverage” to insure the value of your home above $250,000. Ask your insurance agent for options.

Questions to Ask Your Agent

FEMA’s online flood map locator can estimate your premium and help you find an agent who sells federal flood insurance in your community.

When you talk to an agent, make sure you get answers to these questions:

  • What will and won’t be covered?
  • Are there additional expenses or agency fees?
  • Will my policy insure me for the actual cost of replacing items, or just what the items are valued at?
  • Can my zone change, and therefore, my rates? The NFIP is reworking its maps, which is resulting in some potential rate changes.





The Right Disaster Insurance for Your Region

The Right Disaster Insurance for Your Region

Published: June 20, 2013

The region in which you live dictates what kind of disaster insurance you might need to protect your home from Mother Nature’s wrath.

Real estate comes down to location, location, location. Same goes for disasters. Where you live offers clues to how susceptible your home is to damage by floods, tornadoes, hurricanes, earthquakes, wildfires, and other calamities.

These regional risks also indicate whether you need to consider purchasing supplemental disaster insurance to cover claims that wouldn’t be included under a typical homeowners policy. Determining if you live in a disaster-prone region and reviewing your existing coverage are good first steps.

The next step is to create a home inventory, ideally with a digital camera or camcorder. Store copies of those files far away from your house or online at a backup storage site. That way, even if your home and computer are damaged, you’ll have proof of what was lost. Remember, too, to devise a family evacuation plan and assemble an emergency kit with food, water, and supplies.


Homes in low-lying areas, near bodies of water, or downstream from dams are particularly vulnerable. Saturated carpet, insulation, and drywall can promote mold growth. Since flood damage is often excluded from homeowners policies, it’s important to weigh the risk to your property.

At-risk regions: All

Coverage: Find out if your homeowners policy differentiates between “falling water” flooding — heavy rain, which may be covered — and “ground water” flooding, which usually isn’t. Most insurers sell flood insurance, but it may be more difficult to get in high-risk regions. The National Flood Insurance Program is open to anyone. Most experts recommend insuring your home and its contents at the replacement value.

Cost: The average flood insurance policy costs $600 per year, while the average flood claim is $30,000, according to the NFIP.


Damage from hurricanes can result from heavy winds, rain, hail, and tidal or groundwater surge. Insurers in areas that have been battered by storms — especially coastal regions in the Southeast — are more skittish than those in other areas.

At-risk regions: Primarily East Coast and Gulf Coast

Coverage: In low-risk areas, your homeowners policy may cover any damage not done by rising water or groundwater surge. In high-risk areas, you may need to purchase additional coverage or participate in a state-run pool for hurricane and windstorm coverage. Your state’s insurance commissioner can provide details. Be sure to check whether additional hurricane coverage includes flooding from tidal or groundwater surge, or if you need a separate flood policy.

Cost: David Miller, CEO of Brightway Insurance in Jacksonville, Fla., says he has seen comprehensive windstorm and flood policies range from $300 for low-risk areas to up to $20,000 for high-end homes in the riskiest communities.


Although earthquakes are associated with California, fault lines run through virtually every region. The U.S. Geological Survey tracks the latest quakes and keeps maps that show existing fault lines. Even minor earthquakes can damage belongings and leave houses structurally unsound.

At-risk regions: West Coast, especially California, and parts of Midwest

Coverage: Homeowners policies typically exclude earthquake damage. In California, supplemental coverage is available through the California Earthquake Authority. In other states, it’s usually available from private carriers. Your state’s insurance commissioner will have information on options.

Cost: A typical earthquake policy runs between $1.50 and $3 per $1,000 of coverage per year, with a deductible of 5% to 15% of the home’s value. If a home is insured for $200,000, the deductible would be $10,000 to $30,000, possibly with separate deductibles for the structure and the contents.


Winds can reach up to 300 miles per hour and spiral into violent funnels. Although there’s not much that can be done to guard against tornadoes, keeping a home’s exterior in good repair can help mitigate damage from high winds.

At-risk regions: Eastern U.S, especially Central Plains

Coverage: Tornadoes are typically covered under your homeowners insurance. However, it’s a good idea to read over your policy or call your agent for confirmation.

Cost: Homeowners insurance premiums in recent years have averaged about $800 annually.


Approximately 68,000 wildfires burned more than 9.3 million acres in 2012. Every state but Hawaii was hit. Areas that are experiencing drought are most at risk. Damage to homes can result from flames themselves, but also from smoke, soot, and even the water used to fight the fires.

At-risk regions: All

Coverage: Fire is typically covered by a standard homeowners policy. Be sure to verify exactly what your coverage entails. Is cleanup included? How about full replacement value?

Cost: In recent years homeowners policies have averaged as low as $477 (Idaho) to as high as $1,409 (Texas).

Mine subsidence

Homes built over or near abandoned mines are at risk of structural damage if the ground shifts or sinkholes develop. Mine subsidence can also affect the water supply and utilities in the area.

At-risk regions: Primarily Eastern U.S.

Coverage: Mine subsidence isn’t typically covered by homeowners insurance. Coverage is usually available through state-sponsored pools, so check with your state’s insurance commissioner.

Cost: Premiums vary. In Pennsylvania, $130,000 in residential coverage is about $7 per month. In Illinois, it costs less than $95 per year to insure a house worth up to $250,000.




Can One Home Insurance Claim Bump Up Your Annual Premium?

Can One Home Insurance Claim Bump Up Your Annual Premium?

Published: November 7, 2013

Depending on where you live, filing even one claim can push your annual insurance premium up 20%.

When a tree fell on my house during a derecho wind storm last summer, it poked a half-dozen holes about the size of a car steering wheel in the roof. But my husband, Al, and I weren’t in a hurry to call our insurance company.

Call us paranoid, but until we knew how much it was going to cost to repair the roof, we didn’t want to risk letting our insurer know we were even thinking about filing a claim.

Al manages our family’s rental properties and has filed a fair share of insurance claims — from siding damage after someone drove into a house we own in York, Pa., to having our own hardwood floors ruined when the neighbor’s water heater failed, flooding next to our shared townhouse wall.

Our theory is that every time you file a claim, the insurance company punishes you by raising your premium at the very next renewal. File too many claims and they’ll put you in a special, super-expensive rate class.

Related: What Does Homeowners Insurance Cover?

So I wasn’t totally surprised when InsuranceQuotes.com recently came out with a study saying that in some states, filing just one claim with your homeowners insurer can cause your rates to rise as much as 20%.

Some states where you’ll see double-digit premium increases after filing only one claim, according to the study:

Minnesota 21%
Connecticut 21%
Maryland 19%
California 18%
Oregon 17%
Arizona 17%
Alaska 17%

But if you live in other states, your premiums will barely budge after you file a claim:

Texas 0%*
New York 1%
Florida 2%
Vermont 2%
Massachusetts 2%

*In Texas, insurers aren’t allowed to boost premiums after your first claim.

What Gives? Why So Different from State to State?

The differences come down to the rules states set for insurance companies and the difference in weather from state to state, says InsuranceQuotes.com Senior Analyst Laura Adams.

And what sounds bad — being in a state where rates get bumped up pretty heavily after the first claim — can actually be a good thing.

“In some states where we’re seeing big rate increases, consumers are getting low rates to begin with,” she explains. If you live in one of those states and never file a claim, you continue to get the advantage of the low initial rate. If you file a claim, however, you pay a heck of a lot more after that claim.

And what sounds good — being in a state where your insurer either doesn’t bump your premium for filing a claim or bumps it only a bit — can be bad because you may be paying a pretty high premium to begin with, especially if you’re in a state prone to weather-related insurance claims like hurricane-prone Florida.

Careful What You Say When You Call Your Insurer

Imagine how mad you’d be if your premium went up because you called to talk about a claim you were thinking about filing but didn’t file. Suppose, for example, I called my insurance company to talk about that tree limb that fell on my house and said I might be filing a claim, but only if the damage is more than my deductible.

If the insurance company’s customer service representative hears me use the word “claim,” she might open a claim and put that tree damage information in my permanent insurance track record. That could happen even if I opted not to file the claim. Then, I wouldn’t get the claim payment and I might still have my premium rise the next year.

But wait, it gets worse. Claims filed by the people who lived in your house before you did can also cause your premiums to rise. That’s because your CLUE report includes claims filed by anyone who lived at your address for the past five to seven years. So maybe you only filed one claim, but if the prior owner filed two homeowners insurance claims, your insurance premium is underwritten as though you filed all three claims.

You know what else can make your homeowners insurance premiums rise? Having neighbors who file claims. Insurance companies create rates by ZIP code, points out Amy Bach, executive director of United Policyholders, a consumer advocacy group.

“It’s not just the claims you file, it’s the claims your neighbors file, and sometimes it’s just the insurance company just plain trying to make more profit,” she says.

What’s a Homeowner to Do?

1. Don’t play your insurance claim card unless you have a catastrophic loss.

2. Don’t file a claim for less than your deductible. If it’s a close call, say a $750 claim on a policy that has a $500 deductible, think before you file. Is the $250 you’d get ($750 claim less $500 deductible) worth the chance that your premium will rise?

3. Check your permanent insurance record, called a CLUE report. It’s a list of every claim you’ve filed in every property you’ve insured and all the claims filed for your property in the past five to seven years.

4. Ask that mistakes in your CLUE insurance report be fixed. If you called to ask a question and it got recorded as a claim, for instance, get that corrected.

5. Think really hard before you file a second, or worse, a third claim. If you’ve had past claims or prior owners filed claims, every claim could be the one that’s one claim too many and causes the company to tell you they’re not renewing your policy or raising your rates substantially.

Related: How to Correct Mistakes on Your CLUE Insurance Report

I would tell you exactly how many claims is too many, but there’s no universal, industry-wide official number of claims that is too many, according to Michael Barry, vice president of media relations for the Insurance Information Institute.

He points out that insurers have to take natural disasters and other community-wide events into account. For example, there are likely homeowners in the Northeast who’ve filed three claims because they were hit by Hurricane Irene, the derecho that dropped the tree on my house, and Superstorm Sandy.

Personally, I suspect the magic number is three. Bach — despite 29 years of advocating for consumers and analyzing insurance issues – has never been able to uncover the magic number either. “It feels like three claims in five years will get you canceled,” she agreed. “But I don’t know what it is.” United Policyholders dug into the issue when it attempted to restrict insurance companies in California from levying rate increases following minor claims, but the rules remained a mystery to the consumer advocacy group.

You could ask your agent or call your insurance company, but it’s hard to find someone who knows and will tell you what the company’s rules are when you file a claim, Bach says. And by the way, she adds, your company may pay your agent an annual incentive based on how many claims his customers file — so the fewer claims you file, the more money he makes.

The bottom-line: Every time you file a claim, it’s a financial crapshoot. So don’t file unless there’s major money at stake. And if you decide to call your insurance company to discuss the issue, you literally need to repeatedly say that you’re not, not, not filing a claim.





Flood Insurance Rates Going Up? Here’s What to Do

Flood Insurance Rates Going Up? Here’s What to Do

Why Are Rates Going Up?

Two reasons:

1. The Federal Emergency Management Agency is updating its flood maps to be more accurate, which could change your flood risk designation. If your risk is higher, your premiums will go up. If it’s lower, your premiums could go down.

2. Last year, a new law took effect that requires the National Flood Insurance Program (NFIP) to phase out subsidies for some older properties to reflect the full risk of flooding.

Phasing out the subsidized rates and discounts over the next five years will help the NFIP stay solvent.

Some subsidies have been given in the form of “grandfathering.” A grandfathered rate is a discount given to homes built in compliance with then-existing standards in a flood-mapped community where the flood risk has since increased.

Congress and FEMA are reviewing these properties to determine whether to phase out these grandfathered rates. FEMA won’t make a decision on this until late 2014. By then, Congress could pass a law delaying the increase indefinitely.

Do You Have a Subsidized or Discounted Rate?

Only 20% of NFIP policies are subsidized. Most hom eowners already pay the full rate and won’t see an increase.

If your property isn’t your principal residence, is in a special flood hazard area, and was built before the first flood insurance rate map was implemented for your community, you may be getting a subsidy for being what’s called Pre-FIRM (pre-flood-insurance-rate-map).

TIP: To find out if your home is Pre-FIRM, look up your area in the Federal Emergency Management Agency’s (FEMA’s) Community Book.

1. Click your state.

2. Look for the date in the “Init FIRM Identified” column for your area.

If your home was built before that date and it’s in a special hazard zone, you probably have subsidized flood insurance.

If Your Premiums Aren’t Subsidized or Discounted It’s possible you still could see a change in your flood insurance premiums if your home is in a community that adopts a revised flood map after July 6, 2012. If that revised flood map puts you in a different zone, your rates could go up or down.

When Will the Rate Changes Take Effect?

If your home is Pre-FIRM and it’s a second home (rental or vacation), you may already have seen your rates change. A 25% increase was implemented for policies renewing after Jan. 1, 2013. Increases will continue each year until they reach full-risk rates.

In October 2013, more subsidized homes will start seeing rate increases of 25% each year:

  • Severe repetitive loss properties
  • Business properties
  • Properties with previous flood claims for more than the market value of the property

If you have a Pre-FIRM home, and it’s your primary home, and it doesn’t fall into the above-mentioned categories, (lucky you!) you get to keep your subsidized rate until:

  • You sell your home.
  • You let your policy lapse.
  • You have severe, repeated flood losses.
  • You buy a new policy.

Can You Get a Better Rate?

You may be able to get a lower flood insurance rate by changing your home’s flood risk. Congress appropriated a large sum of money for property owners to raise their homes onto piers, posts, columns, or pilings. Check with your local community to see if grant money is available to help you do that. Talk to your insurance agent about how elevating your house will change your flood insurance premium.

There’s also a Community Rating System that could reduce flood insurance rates by up to 45%, depending on which flood plain management regulations your community adopts.

Check with your local officials or insurance company to see if your community participates and if you can get a discount for that. If your community doesn’t participate, write a letter to local officials urging them to join the Community Rating System.

Other things you can do to trim your flood insurance premiums:

  • Opt for a higher deductible on your excess insurance policy if you have one.
  • Convince local officials to put more money into community flood mitigation projects to lower your flood risk.

It won’t lower your premium, but having a flood cleanup kit on hand will make your life easier if you do have a flood.

By the way, NFIP is the best deal. Without it, you have to take your chances in a virtually nonexistent private market for flood insurance at rates only the wealthy can afford.

Some of the same companies that provide private flood coverage also sell “excess coverage” flood insurance. Excess coverage pays to rebuild homes valued at more than the NFIP limit of $250,000.

Mistakes in Flood Insurance Premiums

It’s possible the rate you’re quoted for flood insurance is wrong. If you disagree about whether your home is in a particular flood zone or the insurer didn’t take into account the pilings that raise your home 12 feet in the air, you can appeal your home’s flood zone determination.

An elevation certificate from a surveyor or engineer can lower your premium if it proves your home sits above the predicted flood level.

You’ll also want to correct insurer mistakes that lower your premium. For example, if your policy says your home doesn’t have an elevator or crawlspace and it does, tell your agent, even if your premium will rise when those are included. That ensures your property and possessions are fully covered and recoup what you’re owed.

Think the FEMA map itself is wrong? Check with local zoning officials, your builder, prior owners, a local surveyor, and FEMA to see if anyone has filed a Letter of Map Amendment asking for a map review.

If no one has filed, you can do your own appeal.



Source: By: Dona DeZube; © Copyright 2014 NATIONAL ASSOCIATION OF REALTORS®