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Water damage and flood damage are considered two different types of hazards. All household insurance policies exclude insurance cover for flood damage. When two or more hectares of normally dry land or two or more properties are inundated by water, flooding has occurred. If a washing machine hose ruptures or rain enters the home through the roof or a broken window, water damage has occurred and coverage is provided by home insurance.
Damage caused by flooding is covered by flood insurance. Unlike home insurance, which is offered by private companies, this type of policy is available from the federal government. The National Flood Insurance Program (NFIP) is the government agency that provides these policies. NFIP is managed by the government through the Federal Emergency Management Agency (FEMA). NFIP works with private insurance companies to assist in the provision of flood insurance policies for home owners and renters. The private insurance companies use property and casualty insurance agents to sell the flood insurance policy to owners and renters. The cost of the policy for a specific property does not vary from company to company or agent to agent. The primary factor that determines the cost of a policy is the location of the property and its flood risk as determined by NFIP. Flood maps are used to predict flood risk in a given geographic area, and the specific elevation of a property further determines the level of risk.
Flood insurance offers protection for buildings and contents. Before a policy becomes effective, there is a waiting period of 30 days from the date of purchase. Historically, about 25% of flood insurance claims have come from low to medium risk areas. Because premiums are reduced in lower-risk areas, homeowners and renters pay a fair amount for a policy relative to the risk they face for flood damage. In high-risk areas, federal law requires a mortgage lender to require a property owner to purchase a policy that provides insurance coverage for the building in the event of a flood. Content coverage is not part of the requirement.
Even a small amount of water in a flood can cause damage worth many thousands of euros. All property owners and renters should carefully consider purchasing flood insurance to protect their property and its contents. Remember that a lender only needs a policy if the property is in a high-risk area and only to cover the building. Also keep in mind that a significant percentage of flooding occurs in low-risk areas. Finally, don’t forget the 30-day waiting period before flood insurance takes effect.
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