Flood Insurance is designed to protect you in the event that rising ground water damages your home. Flood Insurance does not provide protection for broken pipes, overflowing toilets or leaky roofs. That coverage can be provided by yo
ur home insurance, though it sometimes requires a special rider. The Federal Emergency Management Agency (FEMA) has set up a National Flood Insurance Program (NFIP) that allows you to purchase Flood Insurance from your insurance agent. Following is a summary of that coverage.
This information is generic in nature and the actual policy has final say on what is covered and what is not. Flood Insurance can run about $350-$400 per year if you are not in a high risk flood area. If your home is on the ocean, it could run several thousands of dollars per year.
Flood Damage is excluded on ALL home policies. Recently, we have seen locations in northern New Jersey that had never flooded in the past, flood. You do not have to live next to a river or ocean to be concerned about flood damage. Go to FEMA to learn more about dealing with the threat of flood; before, during and after. The following facts are from the FEMA web site:
- Your home has a 26% chance of being damaged by a flood during the course of a 30-year mortgage, compared to a 9% chance of fire.
- Last year, one-third of all claims paid by the NFIP were for policies in low-risk communities.
- The average paid claim for the last ten years (1997 – 2006) was $46,168.
What is a Flood?
Flood Insurance covers direct physical loss caused by “flood”. In simple terms, a flood is an excess of water on land that is normally dry. The official definition of a flood by the National Flood Insurance Program is: “A general and temporary condition of partial or complete inundation of two or more acres of normally dry land or of two or more properties (at least one of which is your property) from:
- Overflow of inland or tidal waters;
- Unusual and rapid accumulation or runoff of surface waters from any source;
- Mudflow (A river of liquid and flowing mud on the surface of normally dry land areas, as when earth is carried by a current of water.)
- Collapse or subsidence of land along the shore of a lake or similar body of water as a result of erosion or undermining caused by waves or currents of water exceeding anticipated cyclical levels that result in a flood as defined above.”
What coverage can I buy with Flood Insurance?
There are two areas of coverage for Flood Insurance; Building and Contents (Personal Property).
The National Flood Insurance Program (NFIP) allows you to purchase up to $250,000 in coverage to protect your home, condo, or co-op. If this is your primary home that is a single family dwelling, you live there at least 80% of the time, and it is insured to at least 80% of the replacement cost or at the maximum coverage allowed by the NFIP, your building can be covered at replacement cost up to the policy limit. If you can not answer yes to all of the above statements your building will be covered at “Actual Cash Value”. This is the Replacement Cost at the time of the loss, less the value of its physical depreciation.
Items normally covered under the Building section of a Flood Policy:
Building, foundation, electrical and plumbing systems, central AC, furnace, water heater, refrigerator, stoves, and built-in appliances like dishwashers, permanently installed carpeting over unfinished floor, permanently installed paneling, wallboard, bookcases and cabinets, window blinds, debris removal, detached garage (up to 10% of the building coverage). Any other detached structures need a separate building policy.
Building Flood Insurance coverage is limited in areas below the lowest elevated floor. This would include; basements, crawl space, homes with walk out basements and elevated buildings with enclosure below the home. Flood insurance will only cover the foundation, staircase, drywall for walls and ceiling (basements only), furnace, hot water heater, heat pump, sump pump, fuel tanks and fuel, Central AC units, electrical outlets, switches and circuit breaker box and non-flammable insulation (basements only). Items like paneling, window treatments, any type of floor covering (carpet, tile, wood floors) and all personal property are not covered below the lowest elevated floor.
You can purchase up to $100,000 of coverage for your Contents (Personal Property) for your home, condo, co-op or apartment. Contents are always covered at Actual Cash Value. This is the Replacement Cost at the time of the loss, less the value of its physical depreciation.
Items normally covered under Contents section of a Flood Policy:
Personal belonging such as clothing, furniture and electronic equipment, curtains, portable and window AC units, portable microwaves and portable dishwashers, carpets not included in building coverage above, clothes washers and dryers, food freezers and the food in them, certain valuable items such as original artwork and furs up to $2,500.
There is no coverage for contents items below the lowest elevated floor except for: washer and dryer, food freezer and the food in them (but not refrigerators), portable and window AC Units.
The following items are not insured on a flood policy: currency, precious metals, valuable papers, property and belongings outside the building such as trees, shrubs, wells, septic systems, walks, decks, patios, fences, seawalls, hot tubs, pools, self-propelled vehicles (such as cars and motorcycles), and living expenses (such as temporary housing while the home is repaired.) Damage caused by moisture, mildew or mold that could have been avoided by the property owner is also not covered.
What if the NFIP coverage is not enough to rebuild my home and replace my contents?
Once you have purchased the maximum available coverage allowed by the NFIP and realize that this will not protect you, you do have options. Your broker can secure Excess Flood Insurance to provide protection in addition to the NFIP policy. You can purchase up to the limits on your home insurance policy. Some companies are even starting to allow you to add Flood Insurance to your home policy. This will generally provide broader coverage than is available on the NFIP policy.
We Can Help
If you would like to discuss this subject or other insurance matters further please contact:
Brian P. Boak, CLU, LUTCF, at 201-837-1100 or Brian.Boak@SingerNelson.com.
This information is for general knowledge and does not replace any terms and/or conditions of any policy. Please read your policy to confirm exact coverage.