Flood Insurance

Flood insurance covers losses to your property caused by flooding. Some of the things a standard flood policy will cover include:

structural damage
furnace, water heater and air conditioner
flood debris clean up
floor surfaces such as carpeting and tile

You can also buy a flood insurance policy to cover the contents of your home, such as furniture, collectibles, clothing, jewelry and artwork.

Policies are available in three forms: Dwelling (most homes), General Property (apartments and businesses), and Residential Condominium Building Association (condominiums).

If you have a federally backed mortgage on a home located in a high-risk area, federal law requires you to purchase flood insurance. Also, if you've received a federal grant for previous flood losses, you must have a flood insurance policy to qualify for future aid.

If your area is prone to flooding, you should purchase flood insurance.

If the chance of your area having a flood is small, you can still be safe and purchase a quality policy in a preferred flood area for little relative cost.

Definition of a Flood

Here's how "flood" is defined by the National Flood Insurance Program:

"A general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties (at least one of which is the policyholder's property) from:

Overflow of inland or tidal waters; or
Unusual and rapid accumulation or runoff of surface waters from any source; or
Mudflow; or
Collapse or subsidence of land along the shore of a lake or similar body of water as a result of erosion or undermining caused by waves or currents of water exceeding anticipated cyclical levels that result in a flood as defined above."

So, in plain English, a flood is an excess of water (or mud) on land that's normally dry.

Floods often happen when bodies of water overflow or tides rise due to heavy rainfall or thawing snow. But you don't have to live near water to be at risk of flooding. A flash flood, which can strike anywhere without warning, occurs when a large volume of rain falls within a short time.

More and more buildings, roads and parking lots are being built where forests and meadows used to be, which decreases the land's natural ability to absorb water. Coupled with changing weather patterns, this construction has made recent floods more severe and increased everyone's chance of being flooded.

Dangerous or damaging floods don't always mean dramatic, rushing waters through the streets of your hometown. Just a single inch of water can cause costly damage to your home! Keep this in mind when you're considering flood insurance.

Common myths about Flood Insurance

Myth: I have homeowner's insurance and don't live in a flood zone, so I don't need it.
Fact: In the summer of 2007, Kansas, Missouri and Oklahoma residents suffered terrible flooding, and many were miles from the nearest river. "Flooding can happen anywhere. It has happened in every part of this country in the past 12 months," says David Maurstad, of the Federal Emergency Management Agency, which runs the National Flood Insurance Program (NFIP).

Homeowner's insurance policies do not cover flooding. A separate policy is needed and can be purchased from an insurance agent or directly through NFIP, which administers the program. More than 20,300 communities nationwide participate in NFIP. So most, but not all, homeowners qualify for flood insurance. Check the "Community Status Book" at fema.gov to find out whether your area participates. Then, go to floodsmart.gov and click on "What's your flood risk?" to determine your odds.

Myth: Flood insurance is pricey.
Fact: For fairly low-risk areas, lower-cost "preferred-risk" premiums covering the building and personal belongings can start as low as $112 per year. Full coverage, including $250,000 of building and $100,000 of contents coverage, costs $317 per year, or less than $30 per month. The nationwide average for flood insurance coverage is less than $500 annually. That's often less than interest on a federal disaster loan, plus you don't have to repay the money.

Myth: Federal disaster assistance will cover damage.
Fact: Don't count on it. "A community must be declared a federal disaster area before it is eligible for disaster assistance," says Bob Rusbuldt, of the Independent Insurance Agents & Brokers of America. "Federal disaster assistance declarations are awarded in less than 50% of flooding incidents."

Myth: My lender didn't require flood insurance, so I don't need it.
Fact: Lenders should notify borrowers in special flood hazard areas that they're eligible for flood insurance. But floodwaters don't stop at a line on a map. "One-third of flood insurance claims in a given year come from low- to moderate-risk areas," Maurstad says. Even in low-risk areas, ice jams, melting snow and inadequate draining systems can wreak havoc.

Myth: Flood insurance will cover the entire house, including the basement.
Fact: Comprehensive flood coverage should include two policies: one for the structure and one for the contents of the home. Yet, most contents in the basement are not covered. Basement contents coverage includes the washer and dryer, but it does not include finished walls, carpeting, floors, furniture or personal belongings.

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