As Hurricane Laura strengthens to near category 5, we take a look at its implications and revisit flood insurance along with some of the most important aspects of what it covers.
According to reports by the National Hurricane Center, Hurricane Laura is an ‘extremely dangerous’ category 4 hurricane with just 7 mph to spare it from becoming a category 5 hurricane. The storm surge that will accompany Hurricane Laura’s landfall is expected to cause an unprecedented rise in seawater and directly cause massive damage to property in around Texas and Louisiana- the areas under its direct impact.
The storm surge will eventually cause flooding in otherwise dry areas with rising waters moving inland from the shorelines with an average water height of 7.75 feet in multiple areas. It is, therefore, of extreme importance that you are well-versed with flood insurance and its coverages.
Floods are a very common disaster, especially in areas that are in close proximity to coastlines. Overall, around 90% of natural disasters in the United States involve flooding. However, despite being such a common occurrence, not many people are aware of the fact that regular homeowner’s insurance policies DO NOT cover flood damage. People living near coastlines and even other flood-prone areas have to purchase flood insurance separately along with the regular homeowner's policy that they pay for.
Before purchasing flood insurance, homeowners should be aware of certain facts and have answers to some common questions that can help them better understand the scope of flood insurance as well as the limitations it brings.
1. Standard homeowner’s policies don’t include flood insurance
Your average homeowner’s insurance policy will include some protection from rain but if there is damage associated with rising water level inside your property then a standard homeowner’s policy will not cover it.
Buying separate flood insurance in such cases is going to help cover the damages that homeowners will incur from natural disasters.
2. Flood insurance is purchased through NFIP
Flood insurance is regulated by the National Flood Insurance Program(NFIP) and managed by the Federal Emergency Management Agency(FEMA) in association with all the major insurance companies in the country, making it a federally regulated program. There are two kinds of flood insurance policies that can be bought by homeowners. Both these policies are different in terms of their scope of coverages.
a) A policy that covers your property for damages up to $250,000. b) A policy that covers your belongings and personal property for damages up to $100,000.
You can buy one or both of these policies depending on your requirements.
3. Flood insurance is necessary for mortgaged homeowner’s in high-risk zones
As a homeowner, buying flood insurance is optional for you whether you live in a low-risk or high-risk zone. However, if your lender is federally regulated or insured and your property falls under FHA mortgage while being in a high-risk zone, it is mandatory for you to buy flood insurance. Until the mortgage is paid off, there will be an annual payment for insuring your property from flooding.
4. Coverages under flood insurance
Flood insurance policies either take up the cost to rebuild your home or the actual cash value of your property, whichever is cheaper. The coverages that fall under flood insurance are:
Your property and its foundation Electric and plumbing system Entire HVAC system: Air conditioning, heaters, etc. Kitchen and other appliances inside the property Permanently installed carpeting and wallboard, paneling, cabinets, etc. Detached garage
5. Don’t wait last minute to purchase flood insurance
Unlike other insurance policies, flood insurance has a 30-day waiting period before it takes effect which can delay the process for you if you plan to purchase it immediately. Therefore, it is better to obtain flood insurance beforehand and not wait until a disaster strikes.
The average cost for flood insurance can be about $700 for a one-year premium. However, this amount is completely dependent upon other factors such as individual insurance companies, the scope of coverage, deductibles, and the risk level of your flood zone as well as the age and condition of your property.
Keeping these pointers in mind will help understand the scope of flood insurance and how important it is for you. While we advise that flood insurance is a necessary part of your overall insurance policy, it is always better to assess the area where you live and understand the scope of the policy in terms of protection from damage.