Flood Insurance Basics: Essential Information You Must Know
While your homeowners insurance protects you against many different types of perils, it does not provide coverage from flooding. Although your homeowners insurance does not provide this type of coverage, you can buy additional coverage that will protect you from this flooding. The National Flood Insurance Program is a government program that provides this coverage to homeowners.
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Flood Insurance Basics
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When it comes to getting flood insurance, you can purchase it from local insurance agents. While it is purchase from these agents, it is backed up by the federal government. The National Flood Insurance Program provides this type of insurance to private companies. They regulate the costs and the types of coverage that are available to the general public. In some cases, you may be required to purchase this type of insurance by your lender, depending on where you live.
What it Covers
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While your homeowners insurance provides coverage against water damage from the inside such as from broken pipes, flood insurance provides coverage against damage from the outside. When water comes from an outside source, such as from a large amount of rain, this type of insurance provides coverage. It can pay for any damage that occurs to the physical structure. It can also pay for any damage to the contents in the house at the time of the flood.
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Program Eligibility
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Before you can buy flood insurance, you have to live in a community that participates in the National Flood Insurance Program. Your community has to work with the NFIP to make sure that all of the guidelines for the program are met. The community has to take the necessary steps to make sure that flood damage in the community is minimized. This could include making sure that homes and structures are not built in the worst flood zones.
RCV vs. ACV
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When you buy a flood insurance policy, it could be one of two types. You could get a replacement cost value (RCV) or actual cash value (ACV) policy. If you buy a replacement cost value policy, it will reimburse you for single-family primary homes to within 80 percent of the replacement cost. If you have an actual cash value policy, you will be reimbursed the actual amount of the home less depreciation. Before getting a policy, it is important to understand your type of coverage.
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