April showers bring…spring floods? Are you covered?
We all know the old adage – April showers bring May flowers. But April showers can also bring some springtime flooding. Most homeowner’s insurance policies, though, do not come with flood protection, even in areas where floods are common. You don't want to be caught uninsured if a flood occurs in your area. Here are some more things you may not know about flood insurance.
Do I really need flood coverage?
The short answer is...yes! Just a single inch of water can cause significant and costly damage to your home. Flood coverage will protect your home and assets from losses caused by flooding, covering things such as:
- Structural damage
- furnace, water heater and central air-conditioning
- flood debris clean up
- electrical and plumbing systems
Things like burst pipes that can flood your basement are covered under your homeowner's policy, but flooding caused by weather is covered only under a separately written flood coverage policy.
Flood insurance means you'll be reimbursed for all of your covered losses. As long as your community participates in the National Flood Insurance Program, you're eligible to purchase flood insurance. In general, a policy does not take effect until 30 days after you purchase the coverage. However, if your lender requires flood insurance in connection with the making, increasing, extending or renewing of your loan, there is no waiting period.
Federal Flood Insurance
The National Flood Insurance Program (NFIP) is managed by FEMA and is getting a few updates to help protect American homeowners. As of April 1, 2022, the updates to the program are helping to reduce the cost of coverage, but it may not cover all your flood risks. Most policies purchased through the NFIP have coverage limits of $250,000, and if a flood causes too much damage, you may not have enough to rebuild or repair your home. Federal disaster assistance is also available to American homeowners, but only if the president formally declares a disaster. Even if you do receive disaster assistance, it's often in the form of a loan that you must repay with interest.
Excess Flood Coverage
The two biggest factors when considering excess flood coverage for your home are the property value and the mortgage company you use to secure a loan. If you use a federally backed mortgage program, you may have to purchase an NFIP policy, especially if you live in an area at high risk of flooding. However, if it would cost more than the $250,000 NFIP coverage limit to rebuild your home after a flood, you should consider an excess flood policy. Because flood damage can also put the lender you use to secure a home mortgage at risk, you may also be required to secure excess coverage before you can buy a home.
Lenders may also require you to carry flood insurance that covers one of these three amounts:
- Your home's replacement cost
- the remaining balance on your mortgage
- The $250,000 NFIP coverage limit.
Keep in mind: even if you aren't required to buy excess coverage, these policies can give you the funds you need to rebuild or replace your home.
How does Excess Flood Coverage work?
The terms of an excess flood policy usually match the ones found in your NFIP policy. However, rates and coverage options will vary. While the NFIP determines rates based on the average loss in a particular flood zone, the private insurers that provide excess coverage look at a number of other factors, such as:
- Your home's age, construction materials, elevation and distance from bodies of water
- the foundation structure (e.g., basement crawl space or slab)
- the direction your home faces
Excess flood policies typically don't have a deductible, since they're only triggered when a loss exceeds the limits of your NFIP policy. And, while excess insurance will cover the same losses as the regular flood policy, some insurers may add extra coverage options, like:
- Lost income from rental properties
- additional living expenses
- flood prevention expenses
Choosing the best coverage option
Although floods damage and destroy countless homes every year, both the NFIP and excess coverage can help protect you. For more information on flood insurance, including premium costs, levels of coverage and the flood risk for your area, visit Floodsmart.gov or contact your local FBinsure office. Be sure to follow our social media pages for more blog updates.