There are a number of things most people don’t know about flooding of flood insurance, such as flooding is the top natural disaster in the US, and that flash floods are the top weather related killer, or that 20% of all flood claims are from low and moderate risk flood zone areas (see https://wiseinsurancegroup.com/texas-floods-and-flood-insurance/). There is one other thing most people don’t know about flood insurance, and that is there are limits on how much a policy will pay on a claim.
Whenever a policy, whether it’s a home, auto, or flood insurance policy uses the word, “limits”, it is specifically referring to the maximum amount the policy will pay on a claim. Policy limits can be expressed in a dollar amount, such as the amount of coverage on a dwelling or home, or as a percentage of overall coverage, similar to how home insurance deductibles are listed as a percentage of the dwelling coverage. Flood insurance limits are specified as a dollar amount.
The maximum amount of coverage on a standard flood policy as written through the National Flood Insurance Program (NFIP) and administered by the Federal Emergency Management Agency (FEMA) is $250,000 on the home and $100,000 on contents. The three things the amount of insurance should cover on a replacement cost basis (see https://wiseinsurancegroup.com/texas-floods-and-flood-insurance/) include demolition, debris removal, and rebuilding the home. It would not take too much of a home to quickly exhaust the maximum limit of a flood insurance policy.
For homes or condos that need more than $250,000 in flood insurance on the home and additional contents or personal property coverage, extra coverage is available with an excess flood insurance policy. Excess flood insurance is an additional policy that provides coverage on a home above $250,000. These policies are not written through NFIP or FEMA, but through an insurance company which underwrites these policies.
Not everyone needs excess flood insurance coverage, but those who own a home worth more than $250,000 that is located in an area where a catastrophic flood could occur should have it. These areas may be prone to hurricanes such as Galveston and the Bolivar Peninsula which were struck by a 20 foot storm surge from Hurricane Ike, or flash flooding along our river corridors. Many rivers stretching from north Texas to the Gulf rose to unprecedented levels including the Blanco, San Marcos, Guadalupe, San Antonio, Brazos, Trinity, Colorado, and Red Rivers. In many cases, these rivers crested 20, 30, and even over 40 feet above their flood stage.
Cost for excess flood insurance varies by carrier, amount of coverage, and deductible, however, it’s much less than being on the hook for anything more than $250,000 as you’d be if you didn’t have this coverage. What do you think? Share your questions, comments, or experiences from one of Texas’ hurricanes or this year’s flooding with me on our Google +, Facebook, and LinkedIn pages. I’d love to hear from you!
