Do You Need Flood Insurance?
Are you worried about flooding? Even a small amount of water in your home can cause serious damage, from destroying your drywall to causing mold to grow everywhere.
Flood insurance is an option for some homeowners to provide financial protection in case of flooding. Find out how it works and whether you need it.
Your regular homeowners insurance covers many types of damage, but it won't pay for damage caused by most types of flooding. Flood insurance is a supplemental insurance option that covers the cost of repairing flood damage. It's separate from your regular home insurance policy.
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Your homeowners insurance covers some types of water damage, particularly damage caused by burst pipes. Flood insurance covers specific flooding not related to those issues covered by your standard homeowners insurance policy. FEMA describes flooding as excess water where it's normally dry if it affects at least two properties or at least 2 acres of land. Flood insurance will pay for any damage caused directly by the flooding.
Structure coverage pays you for the replacement cost to repair your home based on what it costs to do the work today. Some of the things included in building coverage are:
- Foundation walls
- Water heaters
- Electrical systems
- Plumbing systems
- Major appliances, such as refrigerators and stoves
- Permanently installed cabinets, carpeting, bookcases and paneling
- Fuel tanks
You can also get flood coverage for your personal belongings, which usually pays out on an actual-cash-value basis. This means they factor in the depreciation of the items to assign a value. A TV you bought five years ago isn't worth as much as a similar model you could buy today. Every flood insurance policy has a maximum amount it will pay. You'll also likely have a deductible that you have to pay before the policy pays on the damage.
On average, flood insurance costs $995 in yearly premiums through the National Flood Insurance Program (NFIP). Several factors go into the cost, including:
- Where you live
- Flooding risk of your property
- Design, age and materials your home is made of
- Policy type, including building-only, contents-only or both
- Amount of coverage
- Deductible amount
Getting a quote from an agent who sells NFIP flood insurance is the best way to determine the cost based on your specific factors.
There aren't any federal regulations that require flood insurance. However, your lender might require you to have a flood insurance policy if your home is in an area with a high flood risk. Regardless of whether your lender requires flood insurance, it's often a good investment if you live in an area with a high risk of flooding.
Even if you're not in a high-risk area for flooding, your home could experience flooding at some point. You could have up to $25,000 worth of damage from as little as an inch of floodwater, according to FEMA. Larger flood events can cause that number to escalate quickly. The size and value of your home can also impact the loss amount.
Without flood insurance, you won't receive any money from your homeowners insurance for those repairs. When you consider the risk, paying a relatively inexpensive premium for flood insurance could be worth it. You can buy flood insurance through the NFIP, even if you don't live in a high-risk area.
While you won't have to worry about the structure of your home if you're a renter, you still have contents that could be destroyed in a flood. Buying a contents-only flood insurance policy to go along with your regular renters insurance can help you protect your belongings. Replacing everything in your home can be extremely expensive, so the relatively inexpensive policy gives you peace of mind.
Flood insurance only covers damages directly caused by the flooding. Some things are excluded, even if they're damaged by floodwaters, including currency, precious metals, vehicles and outdoor features. You also won't receive coverage for living expenses if your home is uninhabitable due to the flood.
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