Flood insurance may be more important to own than homeowners insurance. Every homeowners, condominium and renters policy covers fire damage. But did you know that floods are four times more likely to occur than fires? But these policies do not typically cover flood.
Flood insurance covers damage to a building and contents due to flood, flood-related erosion or mudslide. You can buy flood insurance policy through the National Flood Insurance Program (NFIP) or from some private insurers.
Flood insurance from the NFIP provides coverage for up to $250,000 for the structure of the home and $100,000 for personal possessions. It provides replacement cost coverage for the structure of your home, but only actual cash value coverage for your possessions. Replacement cost coverage pays to rebuild your home as it was before the damage. Actual cash value is replacement cost coverage minus depreciation, so that the older your possessions are, the less you can expect to receive if they are damaged. There may also be limits on coverage for furniture and other belongings stored in your basement. Flood insurance is available for renters, homeowners and condominium owners.
You will need flood insurance if you live in a designated flood zone. But flooding can also occur in inland areas and away from major rivers. Consider buying a flood insurance policy if your house could be flooded by melting snow, an overflowing creek or pond or water running down a steep hill. Don’t wait for a flood season warning on the evening news to buy a policy—there is a 30-day waiting period before the coverage takes effect.
Excess flood insurance is also available from some private insurers for those who need additional insurance protection over and above the basic policy or for those whose community does not participate in the NFIP. Depending on the amount of coverage purchased, an excess flood insurance policy will cover damage above the limits of the federal program on the same basis as the federal program—replacement cost for the structure and actual cash value for the contents.