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Flood Insurance

What it is:

A flood is one of those disasters that can destroy your home along with most of its contents. Even a few inches of water may cause tens of thousands of dollars in damage. Most of the time, a flood doesn’t result in a total loss.

Flood versus Standard Insurance:

A standard homeowner’s insurance policy covers water damage, but not flood damage. In this context, water damage refers to losses due to events like storms. For example, if wind blows out a home’s windows and the accompanying rain damages the house, homeowner’s insurance may pay the claim. If the water damage is due to a flood, it’s not covered. Flood coverage requires a separate policy that specifically protects homeowners against losses from flooding. Individuals can purchase policies that also cover the contents of the home like furniture and electronic devices.

Flood Insurance Options:

Many homeowners get flood protection through the National Flood Insurance Program. The NFIP was authorized by Congress in 1968 to fill in the flood coverage gap left by lack of coverage through homeowner’s insurance. Coverage for houses is limited to $250,000. In addition, homeowners can buy coverage for personal property up to $100,000. There is a 30-day waiting period before actual coverage begins. If a NFIP policy doesn’t provide enough protection, homeowners can get an extra insurance policy from a private sector insurer. These excess coverage policies kick in after a NFIP policy has paid out the maximum.

Who Needs Flood Protection?

Homeowners, condominium owners and even renters may buy coverage for flood damage. If a home is located on a flood plain, the mortgage lender probably requires it. However, the risk of damage from floodwaters isn’t limited to flood plains. About a quarter of all claims are for homes that aren’t on flood plains. Consumers should talk to their insurance agents and assess their need for flood coverage.