What does flood insurance cover?

Flooding is the most expensive and pervasive natural disaster in the U.S., affecting homes in every part of the country. However, flood damage isn’t covered by standard homeowners insurance, so you’ll need to get separate flood insurance to cover your home and personal belongings.

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

• Building property coverage up to $250,000
• Personal property coverage up to $100,000

You have the option of acquiring one or both types of NFIP coverages. Your mortgage company may also require you to get one or both types of coverage as a condition for your mortgage. If you feel that your home needs more coverage than the amounts offered by the NFIP, you may be able to get more comprehensive private flood insurance through your insurer.

So what does standard flood insurance cover, what doesn’t it cover, and should you go with private flood insurance instead?

In this guide:

• What qualifies as a flood?
• What’s covered by NFIP flood insurance
• What’s not covered by NFIP flood insurance
• NFIP vs private flood insurance

What qualifies as a flood?

With flood insurance, you’re covered for direct physical flood damage, but what exactly constitutes a flood? The standard NFIP flood definition 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 (at least one of which is your property).

Floods can result from:

• Overflow of inland or coastal waters
• Unexpected and rapid accumulation or runoff of surface waters from any source
• Mudflow (on normally dry land)
• Collapse or subsidence of land on the shore of a body of water as a result of erosion, causing the water to exceed normal levels

Keep in mind that water damage that originated in your house — 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 (unless caused by a flood event) aren’t covered by flood insurance. However, you can typically add coverage water backup and sump pump coverage to your homeowners insurance policy.

What’s covered by NFIP flood insurance

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

As we touched on earlier, a standard NFIP plan 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 your claims-settlement terms are replacement cost (RCV) — meaning you’re reimbursed for the structure’s replacement value — unless it’s a non-primary home or a multi-family building. The building property coverage portion of your policy covers the following:

• 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 covers 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.

Personal contents coverage reimbursement terms are for the items’ actual cash value (ACV), meaning you’re only reimbursed for the depreciated value of the damaged property. That means if your $1,000 TV was damaged in a flood and your insurer determined it depreciated $400 in value, then you’d only get $600 for the TV rather than the $1,000 you’d get with RCV. You’re covered for the following with personal contents coverage:

• 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’s not covered by NFIP flood insurance

The following types of hazards and property types are typically not covered by the building or personal contents portion of an NFIP 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

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)

NFIP vs 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.

That technological breakthrough — along with the obvious coverage limitations of NFIP plans — have led to unprecedented growth in the private flood insurance market.

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 takes 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).

If private flood insurance is available in your area, you may want to consider it 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, so not only are you getting more comprehensive coverage, but you’re saving money in the process.

Curious about the NFIP or private flood insurance? Call and talk to a licensed representative at Policygenius. We work directly with carriers who can combine your home and flood insurance into one understandable policy package.