Understanding Flood Insurance – What Every Homeowner Should Know

Flooding is the most common and costly natural disaster in the US. Yet many homeowners must know that standard home insurance doesn’t cover flood damage. Fortunately, federally backed NFIP flood insurance and private insurers offer policies accepted by home lenders that fill in the gaps. 


Flood damage caused by hurricanes in recent years and the forecast of even more extreme weather conditions should remind homeowners that insurance policies can be beneficial. FEMA’s National Flood Insurance Program allows homeowners to buy a separate flood insurance policy to cover damage caused by flooding. Flood insurance in North Carolina differs from other policies. Standard homeowner or renters policies do not cover flooding. While some types of damage caused by water (such as burst pipes) are covered, these policies do exclude flooding. Enter your address in this FEMA map to find out if you live in an area at risk of flooding. You are at risk if the zone label of your community starts with Zone A or V. Consider purchasing flood insurance. The cost of your flood insurance policy is usually determined by how close your home or business is to water and the elevation of that body of water. Your premiums will also be affected by the type of policy that you purchase. Preferred Risk Policies, for example, offer building and contents coverage in low- to moderate-risk areas. They are also cheaper than SFIPs. Your coverage will depend on whether you are covered on replacement or cash value. This is the amount you’ll be paid in case of a claim.


Flood insurance will cover repairing or replacing your house’s structure and belongings up to a specific limit. It comes with a small deductible that you will be responsible for paying out of pocket before the insurance company pays on a claim. Your policy premium is affected by the deductible that you select. A higher deductible will result in a cheaper premium and vice versa. The deductible you choose is substantial, and homeowners who have recently purchased flood insurance are sticking to the default option – the $5,000 maximum deductible for homes in high-risk areas denoted Special Flood Hazard Areas. Private insurers can provide excess coverage for homeowners. The standard policy of the federal National Flood Insurance Program covers up to $100,000 in contents and $250,000 for building coverage. 


Most homeowners know that standard home insurance policies protect against damage from fires, wind, and other hazards. Many don’t realize that standard homeowners insurance doesn’t cover flood damage — to get this coverage, you will need to purchase a separate policy known as a flood insurance rider. Whether or not you need to invest in this type of insurance depends on where your home is located and whether it is within a designated flood zone. But even if your property is outside a designated flood zone, floods can still occur due to storms, melting snow, and overflowing creeks or rivers. Sewage backups and drainage problems can also cause floods. If you are considering getting a flood insurance policy, you must familiarize yourself with the different exclusions provided. These typically include landscape damage, additional living expenses, and certain valuables.

Additionally, most policies will not cover mold, mildew, or moisture damage that develops days or weeks after a flood. Another essential thing to note about this type of coverage is that it usually comes with a waiting period before the insurance becomes effective. This is true of NFIP and private market flood policies alike. However, the waiting period may be waived if you purchase an NFIP policy during a declared federal disaster.


Floods are an event of unique weather that requires a specific type of insurance. Many homeowners and renters’ policies don’t cover flooding, but they do cover other types of water damage, such as burst pipes and appliances with leaks. Flood insurance is available through the National Flood Insurance Program for those living in high-risk zones. Private insurers can offer more comprehensive policies than the federal program, which only offers a limit of $250,000 for buildings and $100,000 per possession. They usually replace your possessions with their cash value rather than the standard NFIP coverage. The cost of an insurance policy for floods will vary depending on several factors. These include the location of your home and its age. Older homes are more expensive than newer ones because the materials used are less resistant to water damage. Elevating a home and installing floor holes to drain water can reduce the cost of an insurance policy. All homeowners must consider buying a flood policy to accompany their homeowner or renter policies. It’s worth it for the peace of mind and potential savings on your home and contents.