What is Flood Insurance?

Before we discuss flood insurance, we need to define a flood or a flood loss.
It is important to know that flooding associated with tropical storms, hurricanes, heavy rains, and heavy snow are conditions that affect the U.S. from coast to coast.
The ongoing costs of damages is over hundreds of millions of dollars a year in losses.
Just one inch of floodwater can cause over $25,000 in damages to a home.

Click Here to find out the flood risk of your property today.

FloodByTheNumbersInfographic

Flood

To overly simply, a flood is an excess of water on land that is normally dry.
That sounds like a a reasonable definition. It isn’t however the actual definition of a flood from an insurance perspective..

The official definition used by the National Flood Insurance Program (NFIP) is included below.

” A flood is (1) “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 your property) from

a. overflow of inland or tidal waters;

b. unusual and rapid accumulation or runoff of surface waters from any source;

c. mudflow*.

(2) collapse or subsidence of land along the shore of a lake or a 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 in A.1.a. above. *Mudflow is defined (in part) as “A river of liquid and flowing mud on the surfaces of normally dry land areas, as when the earth is carried by a current of water”

There are many different ways in which a flood event may occur and it is important to know how a flood is defined and what coverage if any are available to protect you.

Flood Insurance

FEMA warns homeowners that home insurance policies do not protect against flood and flood-related loss. In Connecticut, there are approximately 37,743 flood insurance policies in force as of 7/31/2018 protecting $9.6 Billion in property according to FEMA centralized statistics.

Standard home insurance does not cover flooding. While some opt to include limited sewer backup protection, or endorsment related flood protection, it is not the same as flood insurance.
Congress created the National Flood Insurance Program (NFIP) to help provide a means for property owners to financially protect themselves from the risk of flood in 1968. The NFIP offers flood insurance to business owners, renters, and homeowners if their community participates in the NFIP.

When a community agrees to adopt and enforce ordinances that meet or exceed FEMA requirements to reduce the risk of flooding those communities may become eligible for NFIP coverage.

You can learn more about your community and if it participates in the program as well as search for details specific to your location.

Facts

The purpose of Flood insurance is to restore your property to the condition it was prior to the loss.

Flood insurance can pay regardless of if the President or Governor makes a disaster declaration.

Flood-related losses occur outside of high-risk flood areas over 20% of the time.

Like most insurance, you are not to profit from its use and it is used to protect the main asset (Property/Buildings) for most families, individuals, and businesses.

Flood Insurance Specific Coverage

Flood Insurance protects two types of insurable risks neither available options cover land and any damages to the land caused by a flood.

Property (Building Coverage)
- The electrical and plumbing of your property
- Building Specific (There is an exclusion of loss caused by earth movement even if the earth movement was caused by flood)
  - Foundation Walls
  - Anchorage Systems
  - Staircases attached to the building
- Water Heaters, Central Air Conditioners, Furnaces, Sump Pumps
- Carpeting over unfinished floors.
- Permanently installed paneling, wallboard, bookcases, and cabinets (Damaged by flood water)
- Refrigerators, stoves, and other built-in appliances damaged by flood
Building and Contents
- Drapery and some other window coverings
- Furniture, clothing, and electronic equipment
- Portable, removable, and window air conditioners
- Clothing Washers and Dryers
- Other approved contents
  - Carpets not included in-building coverage
  - Food Freezers and the food in them

Claim Settlement

Like in most insurance, there are two methods in determining the settlement of claims.

Replacement Cost Value
- The settlement of a claim will be based on the cost of replacing the lost property.
- The cost to replace the damaged property may be limited based on policy-specific declarations.
Actual Cash Value
- Personal Property is always valued using ACV
- The settlement of a claim will be based on the replacement value of the lost property less any applicable depreciation.

Excluded Coverage

There are many items that may be excluded by flood insurance coverage and it is important to learn about exclusions as it affects what your cost to recover from a loss event will be.

Moisture damage
- Damage caused by moisture, mildew, or mold which was avoidable by the property owners or which cannot be attributed to the flood
Additional living expenses as a result of loss of use (this coverage may in some instances be available under the homeowner’s loss of use provisions)
Loss of business income and associated financial loss
- This coverage may be available under a separate business policy
Damage caused by earth movement, even if the earth movement is caused by flood
Currency, Precious Metals, and valuable papers
Vehicles
Property outside of the insured building
- Wells, Septic Systems, Generators, Battery Power Banks
- Decks, Patios, Gazebos
- Fences, Seawalls, Plants, and Trees
- Swimming pools, Hot Tubs

To understand more about Flood Coverage see the NFIP Summary of Coverage guide provided by FEMA.