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Floods are the most common natural disasters in the United States. Although many floods are caused by huge storms like hurricanes or nor’easters, many floods also result from small, localized events, such as a typical afternoon thunderstorm. No matter where you live, it is important to remember that just a few inches of water in a home can cause thousands of dollars of damage. And it is not just high-risk areas that are flooded. Moderate-to-low risk zones account for over 20% of Flood Insurance claims.
It is important to know that losses due to flooding are not covered under typical Homeowners Insurance policies. Instead, flood coverage for your home and contents must be obtained under a separate Flood Insurance policy provided by the Federal Emergency Management Agency’s National Flood Insurance Program (NFIP). Although these flood policies are underwritten by the federal government, they can be sold by private insurance companies and independent insurance agents like The Safegard Group.
Flood Insurance premiums are determined using rates established by FEMA and depend on a wide range of variables including the location of the building, its elevation and the policy limits and deductibles selected. Flood policy contract coverage terms (what is and what isn’t covered) under a Dwelling (Flood) Policy are the same for all policyholders. Unlike Homeowners Insurance policies, coverage terms with flood policies cannot be broadened by attaching special endorsements.
A common misconception is that Flood Insurance policies will respond to pay losses in the same way a Homeowners Insurance policy would cover losses caused by other perils such as smoke or fire. The fact is, coverage provided by Flood Insurance is relatively narrow in scope compared to homeowners policies. The more restrictive coverage terms allow FEMA to control the amount of claim payments since the policy covers less. This helps keep insurance available for a calamity that can’t otherwise be insured in the private insurance marketplace. Examples coverage restrictions under NFIP flood policies include:
- In high hazard flood zones, flood coverage is excluded for most Contents stored below the lowest elevated floor (e.g. in a crawl space or a garage). Coverage for most contents is excluded in basements regardless of the flood zone.
- Flood Insurance claim settlements on secondary (vacation) homes are determined on an Actual Cash Value basis instead of the more favorable Replacement Cost coverage provided by most Homeowners Insurance policies.
- Coverage is excluded for structures located outside the perimeter walls of your home such as walkways, decks, patios, storage sheds, gazebos, fencing, retaining walls, driveways, bridges and more. Coverage is also excluded for trees, crops, shrubs and other landscaping.
- Coverage is excluded for debris removal unless the debris is located in or on the covered building.
While these coverage restrictions may come as a surprise, at least Flood Insurance providessome coverage for floods. And since Homeowners Insurance polices will not pay for any damage caused by flooding, there is no coverage without a separate Flood Insurance policy.
Your agent at The Safegard Group is always available to discuss Flood Insurance and help you decide if it should be made part of your program of protection.