What is Flood Insurance? Who Needs It?

A typical flood insurance policy from the National Flood Insurance Program (NFIP) is designed to cover losses directly caused by flooding to your building and the contents within it. Floodsmart.gov defines a flood as “an excess of water on land that is normally dry, affecting two or more acres of land or two or more properties.” Most homeowners insurance policies exclude coverage for flood damage, so obtaining a separate flood insurance policy bridges that gap and can help protect your home and belongings from damage caused directly by flooding.

The Federal Emergency Management Agency (FEMA) works with the NFIP to maintain flood maps, which show information about a community’s “flood zone, floodplain boundaries, and base flood elevation” (floodsmart.gov). A flood zone is designated with letters to indicate that area’s likelihood for flooding. Areas with flood zones beginning with letters “A” or “V” on a FEMA flood map are considered to be high-risk flood areas.

If you live in a high-risk flood area, you might be required to carry flood insurance for a couple of different reasons:

1. If you have a government-backed mortgage on your home or business, your lender might require you to carry flood insurance.

2. If your community has received federal disaster assistance in the past, they have to continue to carry flood insurance coverage or they might not be considered for federal disaster assistance in the future.

You can use FEMA’s Flood Map Service Center to look up your community and figure out which flood zone you’re in: FEMA Flood Map Service Center | Welcome!

Even if you don’t live in a high-risk flood area, it’s important to realize that any property has the potential for flooding. Most homeowners policies don’t cover damage caused by flooding, which could be as simple as your sump pump overflowing as a direct result of flooding. However, many insurance companies are now offering “inland flood” or “water backup” coverages that can be added to your homeowners policy and offer limited coverage for a situation like a sump pump overflow.

It’s important to have conversations with your insurance agent to make sure you understand the coverages and limitations of your insurance policies. Don’t have an agent? Give us a call so you can Get the Advantage of having an independent insurance agent on your team!