The United States regularly experiences flooding. In recent years, the spring flooding of the Mississippi River inundated entire cities. However, floods can occur in unexpected places and for unexpected reasons. The U.S. Congress created the National Flood Insurance Programme (NFIP) to provide insurance against flood risks.
In standard homeowners insurance (HO-3), flood is defined as.
“… A general and temporary condition in which part or all of a normally dry land area is inundated.
- flooding caused by inland or tidal waters.
- an unusual or rapid accumulation or discharge of surface water from any source; or
Do you remember Hurricane Katrina? The hurricane’s winds caused flooding in areas that had not previously been flooded. Insurance companies denied thousands of claims on the basis that the damage was caused by flooding. Thousands of property owners who were not near flooded areas were denied claims because they did not have flood insurance.
Here are seven common myths about flood insurance.
Myth #1: Homeowners, renters, and commercial property insurance cover flood damage.
No, homeowners, renters, and commercial property policies do not cover flood damage; NFIP policies are separate policies that cover flood damage to homes and businesses. Flood insurance can also be supplemented with homeowners insurance. The insurance covers both the owner and the tenant of a property, such as a home or business.
Myth #2: Only homeowners and business owners can purchase flood insurance.
In reality, most homeowners, renters, condominiums, and businesses in NFIP participating areas can purchase flood insurance. The maximum coverage amounts are as follows.
- Home and apartment owners – $250,000 for structural damage and $100,000 for domestic damage.
- Renters – $100,000 for homeowners insurance.
- Business owners and renters – $500,000 for construction coverage and $500,000 for contents coverage.
Myth #3: If you are in a high-risk area, you can’t buy flood insurance.
You can buy NFIP insurance wherever you live, as long as you are in an NFIP participating area.
Myth #4: You can’t buy flood insurance if you’ve already suffered flood damage.
In reality, you can purchase flood insurance if your area participates in the NFIP.
Myth #5: You can’t buy insurance just before or during a flood.
In reality, you can purchase NFIP insurance at any time. Generally, there is a 30-day waiting period before the insurance kicks in. The policy also does not cover incomplete damage. An incomplete loss is defined as a loss occurring after midnight on the day the policy takes effect. Therefore, the new policy does not cover past and present losses, but only those that occur after the policy takes effect.
Myth #6: If you live in a non-flood zone, you don’t need flood insurance.
In reality, floods occur regularly in non-flood zones as well: 25% of NFIP claims come from low- and medium-risk areas. On the other hand, if you live in a flood zone, you probably won’t be able to get a mortgage without flood insurance.
Myth #7: FEMA disaster assistance covers flood damage.
If your area is not designated as a disaster area, you will not receive FEMA assistance. Less than 50% of floods are classified as a disaster area. If you did not have flood insurance at the time of the flood, you must purchase and maintain flood insurance in order to receive future payments.
Don’t let your property be damaged by flooding without proper insurance coverage. Get the insurance you need and don’t wait any longer.
Lily Poole is a Property and Home Insurance officer by profession. She is pretty well experienced in the Flood Insurance and accounting field and has an impressive profile in the training and development industry.