What Is Flood Insurance?
Flood insurance is a type of property insurance that covers a dwelling for losses sustained by water damage, specifically due to flooding. Floods can occur due to heavy or prolonged rain, melting snow, coastal storm surges, blocked storm drainage systems, or levee dam failure.
How Flood Insurance Works:
A flood insurance policy is different from the basic hazard insurance coverage contained in a homeowners insurance policy. While standard homeowners insurance covers interior water damage caused by factors like storms or burst pipes, it generally doesn’t cover destruction or damage caused by floodwaters. Property owners who live in areas prone to floods usually need to get special insurance.
Here’s how flood insurance works:
Annual Premium and Deductible:
The insured (the property owner) pays an annual premium based on the property’s flood risk and the deductible they choose. The deductible is the portion of the claim that the property owner must pay out of pocket. A policy with a higher deductible will likely have a lower monthly premium, and vice versa.
Coverage:
If the property or its contents are damaged or destroyed by flooding caused by an external event like rain, snow, storms, or collapsed or failed infrastructure, the homeowner is covered. They receive cash up to the policy limit for the amount of money required to repair the damage or rebuild the structure.
Separate Policies:
Unlike a standard homeowners policy, flood insurance requires that a policyholder buy separate policies to cover a dwelling and its contents. A separate coverage rider is needed to cover sewer backup if the backup was not caused by the rising floodwaters.
Federal Requirement:
Flood insurance is required coverage for a federally backed mortgage of a property in a federally designated flood zone (an area at high risk of flooding due to heavy rains, flash flooding, and mudflows).
