As most everyone knows, flood insurance is not covered by the typical homeowners or business insurance property policy. The solution for getting flood insurance is usually to obtain a policy through the National Flood Insurance Program (NFIP).
NFIP attempted to fill a significant gap in coverage for property owners when property insurance carriers began to exclude flood coverage. Unfortunately, NFIP doesn’t cover everything.
It Doesn’t Cover All Flooding
NFIP has a specific defintion of a flood. It is as follows:
A general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties (one of which is your property) from:
a. Overflow of inland or tidal waters
b. Unusual and rapid accumulation or runoff of surface waters from any source
Per this definition, if your bathtub or toilet overflows and makes a mess of your house, there is no coverage under your flood insurance policy. If your washing machine floods the garage while you’re out running errands there is no coverage.
This type of water damage may be covered under your homeowners policy, but it depends on the type of damage and how it occurred. Talk to your broker about what types of water damage may be covered by your policy.
It Doesn’t Cover Everything You Own
The NFIP policies do limit the amount of coverage you can purchase for your home or business. These limits are as follows:
|Type||Building Limit||Contents Limit|
|One to Four Family Residential||$250,000||$100,000|
|Other Residential (Non-Condo)||$500,000||$100,000|
It is important to note that if the replacement cost of the structure is less than the limits above, the maximum coverage available is the replacement cost amount.
Contents coverage will cover most things inside the home or building up to the coverage limit. However, coverage for contents may be limited by location. For instance, if the contents is outside the structure at the time of loss, it is not covered. If contents is located in the basement of the structure, only specific items may be covered.
NFIP also doesn’t offer much coverage, if any, for outbuildings. Detached garages on the residential property form may be covered up to 10% of the home value, but this is not additional coverage. In cases where there is more than one structure at a location, a separate policy must be purchased for each structure.
It Doesn’t Cover Loss of Use or Business Income
NFIP coverage is limited to real property loss only. Should your home or business receive enough damage to be unuseable, any monetary losses associated would not be covered. This coverage cannot be purchased through NFIP.
How To Bridge the Gap
Flood insurance was once only available through NFIP but some private insurers are beginning to offer flood coverage for homes and businesses. These policies are a bit more broad in the scope of that they will cover, offering higher limits, outbuilding coverage and even loss of use or business income coverage.
Talk to your broker about your unique situation and coverage options. While covering everything under a flood policy might not be possible, you may be able to get closer than you realize.