Flood Damage Insurance Options
The catastrophic impact of floods on life, limb and property are amply documented. However, the issue took on lower priority for homeowners until 2005, when Louisianans endured America's worst disaster in Hurricane Katrina. Homeowners may be further surprised to learn that their policies do not cover flood insurance. That protection is achieved through the National Flood Insurance Program (NFIP), a federally-supported coverage plan available to businesses, homeowners and renters.
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Definition
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NFIP standards define flood as excess amount of water or mud on land that is normally dry. The flood must inundate at least two acres and two properties, according to a National Association of Insurance Commissioners (NAIC) bulletin. One of those properties must belong to the homeowner. Homeowners can buy up to $250,000 of insurance through the program, which is run by the U.S. Federal Emergency Agency (FEMA).
Types
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A home's contents are not covered under standard insurance policies, which only pay up to the actual cash or replacement value--or the policy's liability limit, whichever is lower. To gain this protection, the homeowner may receive up to $100,000 of additional coverage, the NAIC bulletin says. Business owners can receive up to $500,000 through the program for their establishment's building and contents. Renters may need to check options to protect their belongings, which a renter's insurance policy often does not cover.
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Effects
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Up to $30,000 in additional help is available to business and homeowners to offset rebuilding costs, according to information posted on FEMA's official site. Known as the Increased Costs of Compliance (ICC) provision, this aid has been available since June 1997, when it became part of the program, says FEMA's summary. To qualify, the homeowner must live in a High Risk Flood Zone "A." The total claim, including ICC, cannot exceed the policy maximum.
Warning
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Anticipating the right level of protection ahead of time is critical. Most policies require a 30-day waiting period before taking effect, according to the hurricane preparation organization, OneStorm. Renters and homeowners also need to consider their coverage when living in high-risk areas--including inland rivers, areas of melting snow or overflowing creeks. Although flooding is just as likely to occur in these areas, the issue receives far less attention, according to OneStorm.
Premiums And Deductibles
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The average premium through NFIP costs about $500 per year--depending on the type and amount of coverage desired, risk level of flood damage, and the deductible amount, according to the NAIC bulletin. Homeowners can choose different deductibles for building property and personal property claims. The homeowner's mortgage company can even specify that the deductible not exceed a specific amount, the NAIC's bulletin says. Home and business owners can still buy insurance, even if their home is on a floodplain.
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References
Resources
- Photo Credit flood image by dinostock from Fotolia.com
