North Texas was struck with heavy rains Friday night through Sunday. I was reminded flooding can happen at any time, whether it’s caused by torrential rains, a tropical storm, or hurricane. Let’s revisit flood insurance, its two types of coverage, and what they cover.
Many people refer to a major water leak as flooding. Insurance, however, defines flooding, or a flood as rising water caused by rivers, lakes & streams overflowing their banks, rising water from heavy rains, or tidal surge which enters the home. This type of water damage isn’t covered by your home insurance policy, it’s only covered by flood insurance.
There are two types of coverage available on any standard flood insurance policy; coverage for the home or dwelling, and coverage for your personal property. They may be purchased together or separately. For instance, some homeowners may elect to purchase coverage for their home, but not their contents or personal property, while renters only need coverage on their personal property.
Home or building coverage includes:
- The home & it’s foundation
- Electrical & plumbing systems
- Central air conditioning equipment, furnaces & water heaters
- Refrigerators, cooking stoves, & built-in appliances such as dishwashers
- Permanently installed carpeting over unfinished flooring
Contents coverage includes:
- Clothing, furniture & electronic equipment
- Curtains and window treatments
- Portable & window air conditioners
- Carpeting that is not already covered in property coverage (throw rugs, etc.)
- Clothing washers & dryers
The amount of home coverage should be the same as the amount the home is insured for on the home insurance policy, or the replacement cost value of the home. The maximum amount a standard flood policy will provide on the home is $250,000. If the home needs additional coverage to be rebuilt, this can be purchased with an excess flood policy.
Personal property coverage is valued on an actual cash value, ACV, or depreciated bases. That not great, but it does provide some level of coverage to help replace contents ruined by floodwaters. Deductibles for both the home and the contents coverage are usually expressed in dollar amounts such as $1,000 up to $5,000.
Unless the flood policy is required by the mortgage company for a closing, there is a waiting period between when a flood insurance policy is purchased and when it goes into effect. The waiting period is 30 days. The reason for having a waiting period is to prevent someone from buying a flood policy only when flood waters or a storm is approaching.
If your home is in a high-risk area, or a mandatory flood zone, your mortgage company will require you have flood insurance on at least the home. If your mortgage company does not require flood insurance, I recommend people consider it when your home is located on the coast or adjacent to a lake, stream, creek, or river. I also recommend it for anyone whose home is downriver from a dam, in an area susceptible to mudslides or near a dry wash. These are the type of locations more likely to experience a flood than someone whose home is high on a hill.
What do you think? Share your questions, comments, and experiences with me on my Facebook, Google +, and LinkedIn pages. I’d love to hear from you!