Understanding Flood Insurance

According to Statista, there have been approximately 37 billion-dollar flood-related disasters in various regions of America since 1980. Between 2010 and 2019, there were approximately 18 such devastating floods that impacted the people and economy. In 2021, flash floods claimed the lives of approximately 140 people, a startlingly high number which is worrisome in many ways. 

Apart from the loss of life, floods cause significant damage to homes, businesses, and assets. Hurricane Ida, one of the deadliest disasters in American history, caused more than $75 billion in damage across the country.

These disasters have also had a significant impact on the insurance industry. The frequency with which these natural disasters occur puts pressure on the insurance sector. This leads to a rise in premiums for people who live near the coast and are vulnerable to these disasters.

Most businesses and individuals are often perplexed about which insurance policies to prioritize in order to maintain an appropriate risk management portfolio. To that end, in this article, we will discuss flood insurance in detail: what it covers, what it does not cover, and who should consider purchasing it.

What Does Flood Insurance Cover and What It Doesn’t?

After purchasing life insurance and protecting their families under various schemes, many homeowners and business owners do not focus on unforeseen circumstances like natural disasters. It is a common misconception that home insurance or commercial building insurance is sufficient to protect your assets from flood damage. 

All basic insurance policies that protect your assets, such as your home, land, vehicles, and so on, do not provide protection in the event of a natural disaster such as floods. So, if you live in a flood-prone area, it is critical that you purchase flood insurance. Here is an in-depth look at what flood insurance covers and what it doesn’t.

What It Covers

  • All repair work that your appliances, like refrigerators and air conditioners, require
  • All types of repair work for critical segments such as plumbing, pipes, heating systems, etc.
  • Any damage to the house’s structure, such as windows, cabinets, walls, staircases, etc.
  • Damage to personal property located inside the building

What Is Not Covered

  • Any property damage caused by the owner’s ill-treatment or negligence, such as mildew or moisture
  • Any temporary lodging required by the homeowner/business owner doesn’t come under the purview of a flood insurance policy.
  • Any damage to associated property such as fencing, garden, and so on
  • Valuable items, as well as any other asset such as a car

The cost of general flood insurance ranges from $400 to $1500 per year, depending on where you live and the level of protection you require. Some government agencies offer flood insurance, but it only covers up to $250,000 in building coverage and $100,000 in contents coverage for both renters and homeowners. This insurance can be purchased for around $72/month, but the coverage is limited and may not be appropriate for all types of property owners or individuals. The government policy takes 30 days to take effect and is only applicable to certain communities.

Due to limitations, most government policies cannot provide the entire loss valuation. In such cases, it is always advisable to back up your risk profile by purchasing flood insurance that protects you and your family from the worst-case scenario. You can obtain another base policy to get better and all-around protection.

How To Get All-Round Protection Using Other Disaster Covers

Now that we know what a flood insurance policy can and cannot cover, it is time to focus on the areas that require extra protection. Here are some policies to consider to adequately protect your valuables and assets in the event of flood damage.

Valuable Property Insurance

Although some flood insurance policies may cover valuables, in general, your valuables are at the greatest risk in the event of a flood. This includes jewelry, art collections, golf sets, musical equipment, and so on. Purchasing valuable property insurance can help ensure that you are compensated for your lost valuables.

Commercial or Personal Auto Insurance

Many states mandate the purchase of commercial auto insurance, which is why most individuals do purchase an auto insurance. However, you should be extremely vigilant about renewing and maintaining your auto insurance policy, as any loss or accident can be a significant financial drain on you and your family.

In a Nutshell

When it comes to protecting yourself, your business, or your family, flood insurance should be a critical component of your risk management strategy. No natural disaster knocks before knocking the property and valuables down, so it is critical to keep re-evaluating and assessing the appropriate policies for your portfolio. 

Unsure about flood insurance and its nuances? Get in touch with insurance experts for a detailed portfolio analysis and discussion about your needs and adequate policy cover.