Your Flood Policy vs. Your Home Insurance Policy

Flood damage is one of the key exclusions on your home insurance policy. More specifically, home insurance policies tend to exclude all water damage caused by floods, surface water, waves, tidal water, tsunamis, and overflows of a body of water. As a homeowner, you should consider getting a flood insurance policy to adequately cover your losses in the event that some water-related disaster strikes.

Flood insurance is purchased separately from your home insurance policy as part of the National Flood Insurance Program (NFIP), which is a federally supported partnership between the Federal Emergency Management Agency (FEMA) and private insurance companies. Without the federal government’s support, private insurers may not be able to offer flood insurance at reasonable prices, or they may not be able to offer the coverage at all.

You may still purchase your flood policy through your regular insurance agent, but it will be a separate policy from your regular homeowners insurance policy. While it’s possible that you may already have a flood policy because your mortgage lender required you to purchase coverage as a condition to approving your loan, you may not have all the coverage enhancements described below.

Much like your home insurance policy, the flood policy can provide for both your house itself (the dwelling) and your personal property (contents). A basic flood policy only provides coverage for the dwelling and you must separately elect coverage for your contents, which can be done on a replacement cost or actual cash value basis. Replacement cost is the cost to replace the damaged part of your dwelling without taking into account its depreciation. Actual cash value will only reimburse you for the replacement cost less depreciation. So as it provides more coverage, replacement cost policies tend to be more expensive, but keep in mind that even if you elect the replacement cost policy for your dwelling, your contents coverage can only be covered at actual cash value.

Some homeowners do not believe they need the coverage because they do not reside in high-risk areas for flooding. However, according to NFIP, more than 20% of all flood claims on NFIP policies are from homes outside of high-risk areas. Therefore, you should give careful consideration to the cost and benefits of flood insurance, regardless of where you reside – Las Vegas, Fort Worth, Louisville, Phoenix, Sacramento.

In addition, because flood policies are part of the federal flood program, they are standardized and the coverages are identical as provided by any insurer. The premium is also standardized so that you will not pay any more or less from one insurer to the next. Your rates are set based on your risk profile, which are the type of home you are insuring and the location of the home. The NFIP policies are also available to renters and condominium owners for their contents.

The NFIP provides very good information on their website, FloodSmart.gov. You should review the basic information and evaluate your home’s flood risk.


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