Flood Information 101
By now, you probably know that only flood insurance covers flood damage, but you probably don’t know all of the details. Here are a few of the more frequent terms:
Insurance Agent
You cannot buy flood insurance directly from the federal government, you must us an Agent. The flood program is complex and for the best results you should use an agent with direct knowledge and experience in the National Flood Insurance Program.
Coverage
As with any other type of insurance, it’s important to know what your policy does and doesn’t cover. For example, damage caused by a sewer backup is only covered by flood insurance if it’s a direct result of flooding. The damage is not covered if the backup is caused by some other problem. For a complete summary of coverage, go to What’s Covered.
Deductible
Deductibles apply separately to building and contents with different amounts to choose from. Like other insurance plans, a higher deductible will lower the premium you pay, but will also reduce your claim payment. Your mortgage lender can also set a maximum amount for your deductible.
Mandatory Requirements
Homes and businesses with mortgages from federally regulated or insured lenders in high-risk flood areas are required to have flood insurance. While flood insurance is not federally required if you live in a moderate-to-low risk flood area, it is still available and strongly recommended.
Rates
The NFIP, a federal program, offers flood insurance, which can be purchased through most leading insurance companies. Rates are set and do not differ from company to company or agent to agent. These rates depend on several factors including the date and type of construction of your home, along with your area’s level of risk. All premiums include a Federal Policy Fee and ICC Premium.
If your agent is inexperienced with flood insurance you may very well be paying the wrong rate. Do not let an inexperience agent be your first big disaster with the flood insurance program.
30-Day Waiting Period
There is typically a 30-day waiting period—from date of purchase—before a new flood policy goes into effect. Here are the only exceptions:
- If your lender requires flood insurance in connection with the making, increasing, extending, or renewing of your loan.
- If an additional amount of insurance is required as a result of a map revision.
- If flood insurance is required as a result of a lender determining that a loan that does not have flood insurance coverage should be protected by flood insurance.
- If an additional amount of insurance is being obtained in connection with the renewal of a policy.
Payment
Payment must be made for the full year’s premium, unless your agent or company provides that independently. The National Flood Insurance Program accepts check and credit card payments (i.e. American Express, VISA, MasterCard). Coverage will not be effective until full payment is received.
If you rent or own your condominium unit, it is a good idea to purchase both building (if you own the unit) and contents coverage. If you are a tenant, contents only coverage is available. The policy premium is based on several factors including the flood risk of the building that you occupy.
Moderate-to-Low Risk
Most condo owners or renters in moderate-to-low risk areas are eligible for coverage at a preferred rate for condominiums in moderate-to-low risk areas. Preferred Risk Policy premiums are the lowest premiums available through the NFIP, offering building and contents coverage for one low price.
If you don’t qualify for a Preferred Risk Policy, a standard rated policy is still available. Even though flood insurance isn’t federally required, nearly 25% of all NFIP flood claims occur in moderate-to-low risk areas.
High-Risk
If you live in a high-risk area, a standard rated policy is the only option for you. It offers separate building and contents coverage.
The Residential Condominium Building Association Policy (RCBAP)
This form of the Standard Flood Insurance Policy insures residential condominium associations and thus the building in which your unit is located.
Flood insurance premiums are calculated based on factors such as:
- Year of building construction
- Building occupancy
- Number of floors
- Number of Units
- The location of its contents
- Its flood risk (i.e. its flood zone)
- The location of the lowest floor in relation to the elevation requirement on the flood map (in newer buildings only)
- The deductible you choose and the amount of building and contents coverage
If you own your unit and it is located in a high-risk flood area, you will be required to purchase flood insurance if your lender is federally regulated or insured.
NFIP = National Flood Insurance Program
Homeowners
As a homeowner, it’s important to insure your home and its contents. Depending on your property location, your home is either considered at high-risk or at moderate-to-low risk for a flood. Your insurance premium will vary accordingly.
Moderate-to-Low Risk
Most homeowner’s in a moderate-to-low risk area are eligible for coverage at a preferred rate. Preferred Risk Policy premiums are the lowest premiums available through the NFIP, offering building and contents coverage for one low price.
If you don’t qualify for a Preferred Risk Policy, a standard rated policy is still available. Even though flood insurance isn’t federally required, nearly 25% of all NFIP flood claims occur in moderate-to-low risk areas.
High-Risk
If you live in a high-risk area, a standard rated policy is the only option for you. It offers separate building and contents coverage.
The Dwelling Form provides insurance for buildings with one to four units, including single-family condominium units and townhouses. The General Property Form provides insurance for other- residential and commercial buildings. Both forms provide optional contents coverage.
Calculated Risk
Flood insurance premiums are calculated based on factors such as:
- Year of building construction
- Building occupancy
- Number of floors
- The location of its contents
- Its flood risk (i.e. its flood zone)
- The location of the lowest floor in relation to the elevation requirement on the flood map (in newer buildings only)
- The deductible you choose and the amount of building and contents coverage
If your home is in a high-risk flood area and you have obtained a mortgage through a federally regulated or insured lender, you are required to purchase a flood insurance policy.
NFIP = National Flood Insurance Program
Building Property
- The insured building and its foundation
- Electrical and plumbing systems
- Central air conditioning equipment, furnaces, and water heaters
- Refrigerators, cooking stoves, and built-in appliances such as dishwashers
- Permanently installed carpeting over unfinished flooring
- Permanently installed paneling, wallboard, bookcases, and cabinets
- Window blinds
- Detached garages (up to 10 percent of Building Property coverage) Detached buildings (other than garages) require a separate Building Property policy
- Debris removal
Personal Contents Property
- Personal belongings, such as clothing, furniture, and electronic equipment
- Curtains
- Portable and window air conditioners
- Portable microwave ovens and portable dishwashers
- Carpets that are not included in building coverage
- Clothing washers and dryers
- Food freezers and the food in them
- Certain valuable items such as original artwork and furs (up to $2,500)
What’s Not Covered:
- Damage caused by moisture, mildew, or mold that could have been avoided by the property owner
- Currency, precious metals, and valuable papers such as stock certificates
- Property and belongings outside of an insured building such as trees, plants, wells, septic systems, walks, decks, patios, fences, seawalls, hot tubs, and swimming pools
- Living expenses such as temporary housing
- Financial losses caused by business interruption or loss of use of insured property
- Most self-propelled vehicles such as cars, including their parts (see Section IV.5 in your policy)
Flood Insurance for Basements and Areas Below the Lowest Elevated Floor
Coverage is limited in basements regardless of zone or date of construction. It’s also limited in areas below the lowest elevated floor, depending on the flood zone and date of construction. These areas include:
- Basements
- Crawlspaces under an elevated building
- Enclosed areas beneath buildings elevated on full-story foundation walls that are sometimes referred to as “walkout basements”
- Enclosed areas under other types of elevated buildings
Make sure to ask for additional details on your basement coverage.
As a business owner, you know that protecting your building and your contents is vital to its survival. Your business is either in a high-risk or moderate-to-low risk area and insurance premiums vary accordingly.
Moderate-to-Low Risk
Most commercial buildings in a moderate-to-low risk area qualify for coverage at a preferred rate. Preferred Risk Policy premiums are the lowest premiums available through the NFIP, offering building and contents coverage for one low price. You can also opt for Contents Only coverage, if you prefer.
If you don’t qualify for a Preferred Risk Policy, a standard rated policy is still available. Even though flood insurance isn’t federally required, nearly 25% of all NFIP flood claims occur in moderate-to-low risk areas.
High-Risk
If you live in a high-risk area, a standard rated policy is the only option for you. It offers separate building and contents coverage.
Flood insurance premiums are calculated based on factors such as:
- Year of building construction
- Building occupancy
- Number of floors
- The location of its contents
- Its flood risk (i.e. its flood zone)
- The location of the lowest floor in relation to the elevation requirement on the flood map (in newer buildings only)
- The deductible you choose and the amount of building and contents coverage
If your commercial property is in a high-risk flood area and you have a mortgage from a federally regulated or insured lender, you are required to purchase a flood insurance policy.
NFIP = National Flood Insurance Program