Flood Insurance Policy Basics

Most people who don’t live in hurricane regions don’t think they need flood insurance. Then a plugged storm drain overflows into their home and they discover that homeowner’s insurance doesn’t cover it. Regardless of where you live, you should consider adding flood insurance to your policy.

Where to Get Flood Insurance
Flood insurance is provided by the National Flood Insurance Program. Although you buy it through your homeowner’s insurance agent, it is administered by the program. Visit Floodsmart.gov to find a local agent if your insurance agent doesn’t offer it. Renters and homeowners can both buy flood insurance, although renters would want to limit the policy to contents only.

What Is Considered a Flood
If your water heater breaks or your roof collapses in a rain storm, your homeowner’s insurance usually applies. However, if the flooding comes from the ground, for example, from a rainstorm washing down a hill, a plugged storm drain running over, or water gushing from a broken water main, then your homeowner’s policy typically won’t cover it. Flooding can happen anywhere, anytime, even if you don’t live in a high-risk flood zone.

Insurance Rates
Insurance rates vary depending on whether you live in a high-risk or moderate/low-risk zone. Your zone is determined by flood maps prepared by the government. You can also elect to cover the building only, the contents only, or both. Finally, the rate is affected by your chosen deductible and level of coverage. Policies range from $100 to $1500, with the average being $540 a year.

What’s Covered
Different portions of the policy cover different portions of your home.

Building Coverage
Building coverage includes anything permanently fixed to the home, including:
Structure and foundation
Detached garage
Built-in appliances
Refrigerator and contents
Plumbing, electrical, and HVAC systems

Contents Coverage
Contents coverage includes the things that aren’t bolted down:
Personal belongings and clothing
Free-standing freezer and contents
Washing machine and dryer

Not Covered
Preventable moisture or mold damage
Currency or precious metals
Loss of Use

Basements receive only very limited coverage unless you add a special rider.

Although you may never need flood insurance, you should consider it if you live on or near a hillside or live in a city that is strapped for cash (which is most of them.) You never know how old those underground pipes are or when they might break.

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