Flood Insurance: Myths vs. Reality
Flood insurance is a topic that is both easy to understand but complex enough to bring about many misconceptions and myths. It is valuable to be able to tell myth from reality and have an understanding of exactly what flood insurance does (and does not) cover. With the vast amount of damage that a flood can cause, and all of the monetary issues that can come along with it, flooding can pose a huge problem for property owners. Being covered well in advance is essential.
Without further ado, here are some myths about flood insurance:
1. Flood damage is covered by homeowners insurance. This is perhaps the largest and most pernicious myth. Standard homeowners policies will cover some types of water damage at times, but not flood damage. Protection from flood damage requires separate flood insurance policies. If you aren’t sure if you are covered, it will pay immensely to find out before it is too late. There is nothing worse than believing you are covered only to find out you are out tens or hundreds of thousands of dollars in repair costs.
2. The government will assist with payments for repairs after a home flood. If (and only if) the President declares a flood to be a disaster will federal disaster relief funds be dispersed. According to FEMA, less than half of all floods are considered to be disasters. When they are declared to be disasters, federal disaster relief grants are issued and are usually value at about $5,000. These grants usually manifest as low-interest loans. In other words: don’t count on the government helping.
3. Flood maps are static and unchanging. This one should be obvious but often isn’t. Anyone who has paid attention to their property has likely seen their flood zone change from time to time. As communities get larger and expansion occurs, as the climate changes and green spaces are altered, the flood map of a given area will change.
4. 100-year flood plains only flood once every 100 years. What “100-year flood plain” actually means is that each year the area has a 1 in 100 chance of having a flood. The chance does not change. Thus, every year the chance of it flooding is the same as the year before, even if during the previous year there was a flood.
5. 100 percent of flood damage will always be covered by flood insurance. This one should jump out as “obviously incorrect.” All types of insurance come with policy limits, and flood insurance is no different. Standard flood insurance policies cover up to $250,000 in building coverage for single family homes and up to $100,000 for other belongings. When purchasing a policy, either or both types of coverage can be chosen. Commercial property owners are able to purchase coverage limits that are considerably higher.
6. Flood insurance is only needed during the wet/rainy season. Incorrect. Just like you don’t wait to purchase car insurance until after you have an accident, you don’t wait until water starts rising into your living room to buy flood insurance. There is typically a 30-day wait period before flood insurance policies go into effect as well. Put the insurance policy into place when it’s dry so that if and when it gets wet, you won’t have to worry about it.
7. If you don’t live in a flood zone, you don’t need flood insurance. Even in areas with a lower risk of flooding, floods can still occur. All it takes is one bad storm. According to FEMA, about 20 percent of flood insurance claims come from areas that are not at a high risk for flooding.
8. Minor flooding isn’t a big deal. Maybe, maybe not. Minor flooding can still cause significant damage. One inch of water entering a home can cause tens of thousands of dollars in property damage. Just consider the replacement cost or cleaning and drying cost of the carpeting or flooring by itself, not to mention anything that was sitting on the floor.
9. Only property owners can buy flood insurance. You do not need to own the property to purchase or qualify for flood insurance. Renters can purchase flood policies to protect their personal belongings. Likewise, policies can be bought by commercial property owners who need to protect their businesses and supplies.
It also pays to have access to resources that can help. Floodsmart.gov is a great website the government maintains to assist property owners with understanding flood risks in their area. Having an insurance professional you can review property risks with on a yearly basis should also be considered. The key to handing potential flood damage is knowledge and preparation. Understanding how the insurance works (and how it doesn’t) should put you in a position to be better protected should a flood occur.
For more information about flood insurance or to get covered today, contact Wayne Nesbit at 952-746-4312 or wnesbit@nesbitagencies.com.