April showers may lead to May flowers, however, there can be too much of a good thing. Just ask the residents of Houston or Palestine, Texas. A few weeks ago, parts of Houston received over 16 inches of rain within a 12 hour period. The results were very predictable; seven people drowned and over 1,000 homes flooded. Rain also caused widespread flooding in Palestine killing 6 to 7 people and flooding a number of homes and businesses in the area.
When a massive amount of rain falls in a short period of time, flooding is inevitable. After seeing these two events, I felt it important to revisit flood insurance by answers some of the questions I’m asked by homeowners. Over the next two weeks, I’ll also answer the question of who needs flood insurance and talk about cleaning up after a flood.
What is a flood? Watching the video of the Houston and Palestine floods, most people have an idea of what a flood is. Insurance companies, however, define flood as rising water from rains, creeks, streams, lakes, and rivers that enters a home or other structure. This means if your French drain is overrun by a heavy downpour and causes water to enter your home, you have a flood claim. Only flood insurance will cover damage caused to the home by rising water.
What isn’t a flood? If a drain inside your home backs up, a pipe leaks, or your water heater spontaneously ruptures, then you don’t have a flood. You have a water leak or a backed up drain. Your home insurance will cover damaged caused by a sudden and accidental leak, and if you have optional drain and sewage backup coverage, then damaged caused by a backed up drain will also be covered.
Who writes flood insurance? Many insurance companies offer flood insurance, however, in most cases, they are offering a policy through the National Flood Insurance Program (NFIP). FEMA administers the flood hazard mapping program that determines flood zones.
Policy coverage: There are two possible types of coverage on a flood policy, property and contents. Property coverage is for the home and contents coverage, which Is optional, is for your personal property (furniture, clothing, electronics, kitchenware, etc.).
The maximum amount of property coverage for a standard flood policy is $250,000 and $100,000 in contents. The home is covered on a replacement cost basis while the contents are covered on an actual cash or depreciated basis.
Policy deductibles: While Texas home insurance policies usually use a percentage of the home’s insured amount to indicate the deductible, flood insurance uses dollar amounts. Standard deductible amounts are in $1,000 increments starting at $1,000 and maxing out at $5,000.
Excess flood insurance: If the maximum amount of property or contents coverage with a standard flood policy isn’t enough, some companies do provide extra or excess flood coverage. This is optional coverage underwritten by the insurance company, not NFIP or FEMA. This is needed coverage if you’re home’s replacement cost is more than $250,000.
Waiting period: New flood policies typically have a 30 day waiting period before they go into effect. The 30 days starts once payment has been received. This is designed to prevent people who don’t have flood insurance from buying a policy before being hit by an imminent event such as a hurricane about to make landfall or water lapping at your front door. The one exception is if flood insurance is required for a new home purchase. These policies go into effect on the closing date.
What questions do you have? Share your questions, comments,, and experiences with me on my Facebook, Google +, and LinkedIn pages. I’d love to hear from you!