Guide to understanding how flood insurance works to protect your home and business.
Each year, home and business holders all throughout the nation experience flooding to their properties. Many property owners do not realize the importance of purchasing flood insurance for their properties until it is too late. Flood insurance is available to renters, condo owners or renters, homeowners, and commercial owners and renters. These costs will vary depending on how much insurance is purchased, what is covered, and what the property’s flood risk is. Flood insurance policies cover any physical damage to your property and possessions that have been directly affected by water. The Standard Flood Insurance Policy is a policy that pays for direct physical damage to your insured home or business up to the replacement cost, or ACV (actual cash value). This policy does not cover any personal property that has been affected, as content coverage must be purchased separately. Flood insurance pays the replacement cost or ACV of the direct damages up to the policy limit. This is not a guaranteed replacement cost policy. That type of policy pays the complete cost to restore your property regardless of the limit. Flood insurance will not pay more than its policy limit.
The NFIP (National Flood Insurance Program) offers coverage for the building property up to 250,000, and personal property contents, up to 100,000. It is encouraged that property holders purchase both types of coverage to be safe. It is important to remember that a flood insurance policy only covers what was directly caused by the flood. If you have suffered a sewer backup due directly to the flood, then it will be covered. If the backup was sustained by some other problem, then it will not be covered.
Unlike ACV, RCV (replacement cost value) is the cost without any depreciation to replace the part of the building that was damaged. There must be conditions that are met before this can happen though, and they are as follows: the building must be single-family dwelling, the building must be your principal residence at the time of the loss; meaning that you must live there 80 percent of the year, and your building coverage is at least 80 percent of the full replacement cost, or the maximum available for the property under the NFIP. ACV is replacement cost value at the time of the disaster, minus the value of its physical depreciation. Items such as carpeting and appliances are adjusted each year. Also, personal property and contents is always valued at ACV.
When purchasing flood insurance for your property, it is important to begin before the storm season hits and especially if you live in a flood prone area because it takes about 30 days for the policy to go into effect. For homeowners, this is what is covered: the insured building and its foundation, electrical and plumbing systems, installed carpeting over unfurnished flooring, air conditioning equipment, paneling, bookcases, and cabinets, and window blinds. As for personal contents there are many things that can be covered such as clothing, furniture, electronic equipment, curtains, portable air conditioning units, carpeting not included in building coverage, food freezers and food in them, clothing washers and dryers, and certain items such as original artwork and furs.
Things that are not covered are damaged caused by mold and mildew that could have been avoided, currency and precious metals, property and belongings outside of the insured building ( trees, plants, wells, decks, patios, fences, seawalls, hot tubs, and swimming pools), living expenses like temporary housing, financial losses, and vehicles.
For basements and crawl spaces the coverage is fairly limited, no matter the zone or date that it was constructed on. This includes basements, crawl spaces underneath an elevated building, enclosed areas underneath elevated buildings, and walkout basements. It is always a good idea to converse with your agent for any additional details you may need on your basement coverage.
Visit the official NFIP Website for more information!