What does flood insurance cover?

Flooding is the most expensive and common natural disaster in the U.S., affecting homes in every corner of the country, but many people don’t know that homeowners insurance won’t cover damage caused by floodwaters. If you live in a flood-prone area, you will want to consider taking out a flood insurance policy to cover your home and personal belongings against this costly disaster.

Most major homeowners insurance providers offer flood insurance through the National Flood Insurance Program (NFIP), a federal government program with two types of policies:

• One that covers your home up to $250,000
• One that covers your personal property (like clothing, furniture, and electronics) up to $100,000

You have the option of acquiring one or both types of NFIP policies. If your home is mortgaged and you live in a high flood risk area, your lender may require you to get building coverage to protect your home. If your home needs more coverage than the $250,000 limit offered by the NFIP, many insurance companies offer their own private flood insurance product that could provide you with higher limits and broader coverage.

What is a flood?

With flood insurance, you’re covered for direct physical flood damage, but what exactly is a flood? The NFIP defines a flood as the following:

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 (at least one of which is your property).

There are many causes of flooding, including overflow of lakes, rivers, or coastal bodies of water; accumulation of surface water from rain or groundwater; and mudflows on the surface of normally dry land.

Keep in mind that water accumulation from an exploding pipe or water heater — even if it literally floods your house — is not considered a flood. That means water damage caused by leaks or sewage and sump pump backups aren’t typically covered by flood insurance. However, your homeowners insurance should allow for add-ons, including water backup and sump pump coverage, that cover your home and belongings from plumbing-related water damage.

What is covered by flood insurance?

Flood insurance covers any direct physical damage that was caused by a flood. That could mean damage caused by a mudslide or sewer backup if the mudflow or backup are a direct result of a flood event.

As we touched on earlier, a standard flood insurance policy has two coverage types: building property coverage and personal contents coverage.

Building property coverage

Your maximum coverage limit for building property coverage under NFIP plans is $250,000 and you’re reimbursed for the home’s replacement cost when you file a claim. With building coverage, the following parts of your home are covered.

• The home and its foundation
• Home essentials like plumbing, air conditioning, furnaces, water heaters, and fuel tanks
• Built-in home appliances like your refrigerator, oven, microwave, dishwasher, washing machine, and dryer
• Permanently installed carpeting over unfinished floor or window fixtures like blinds and curtains
• Permanently installed cabinets, shelves, paneling, and bookcases
• Detached garages (up to 10% of your building property coverage can be used)
• Debris removal

Personal contents coverage

Your personal contents coverage protects the stuff inside your house and typically needs to be added separately to complement your building coverage. Your maximum reimbursement amount with the NFIP plan is $100,000. With personal contents coverage, the following items are covered.

• Personal belongings like clothing, furniture, kitchen utensils, and electronics
• Portable AC units
• Portable microwaves, refrigerators, and other types of appliances
• Carpeting that isn’t over an unfinished floor
• Spoiled food
• Certain types of expensive valuables like jewelry, art, and furs (up to $2,500 per item)

What does flood insurance not cover?

The following types of hazards and property types are typically not covered by the building or personal contents portion of a flood insurance policy.

• Moisture or mildew/mold damage that “could have been avoided by the homeowner”
• Sewer or sump pump backup unless it was caused by the flood
• Precious metals
• Cash
• Valuable papers like stock certificates
• Trees and plants
• Decks
• Fences
• Pools and hot tubs
• Loss of income
• Additional living expenses like hotels or temporary housing if the flood makes your home uninhabitable

What does flood insurance not cover in basements?

Additionally, NFIP flood insurance has limited coverage for areas below the lowest elevated floor, like your basement, crawlspace, or bomb shelter. Certain types of property and home features not covered in your basement include:

• Paneling, bookcases, and window fixtures
• Any carpeting, rugs, or floor tiles
• Drywall for both walls and ceilings
• Walls and ceilings not made of drywall
• Most types of personal property (except freezers and the food in them, washers and dryers, and portable air conditioners)

Private flood insurance

The flood insurance marketplace — long considered too risky for private insurers — has taken off in recent years and grown more competitive, as carriers have more sophisticated risk modeling and predictive analytics to assist them in underwriting.

In fact, according to a National Association of Insurance Commissioners (NAIC) study, over 120 insurers wrote their own private flood insurance in 2018, up from 90 insurers in 2017, and 50 in 2016. Additionally, a new rule that went into effect in July 2019 could be a boon to the private flood market, as it would allow mortgage companies to accept private flood insurance instead of NFIP plans (in areas where NFIP plans are currently mandatory).

Should I get private flood insurance?

If private flood insurance is available in your area, you may want to consider one over an NFIP plan. For one, NFIP policies only cover your home and personal property, and your coverage amounts are limited. As climate change intensifies and flood events possibly become bigger and more catastrophic, you’ll want insurance that can cover a full rebuild of your home. The $250,000 building coverage offered by the NFIP may not be enough.

With private flood insurance, you generally have coverage limits that are as high as what you’d have for homeowners insurance, and private flood plans typically include additional protection, like loss of use coverage. You may also find that flood insurance is cheaper than NFIP coverage — giving you both higher quality and more affordable flood protection.