According to the National Association of Insurance Commissioners, 33% of heads of households in the United States falsely believe that a homeowner or renter’s insurance policy covers flooding.
For that reason, it’s estimated that only 18% of Americans have flood insurance, even though floods are the most common natural disaster in the United States. In the aftermath of Hurricane Sandy, many property owners discovered too late that their homeowner and renter’s policies did not cover losses from flooding.
In 2012, 25% of flood claims were filed by property owners in low or moderate risk flood areas who did not live in a flood zone.
Many people do not understand the difference between rain damage and flooding. With flooding, the water rises from the outside into the property and can be from any source, such as a storm surge, a sudden downpour, or mudflow. Water that leaks through the roof in a storm or flooding that occurs inside a home from an overflowing water heater or washing machine is usually covered by a standard homeowner policy.
Flood insurance is issued by The National Flood Insurance Program (NFIP), a federal government program that offers flood insurance through insurance companies and agents acting as distributors for the NFIP. Since rates are set by the government, flood insurance rates are the same among insurance companies.
The maximum amount of flood building coverage available through the NFIP is $250,000.
The good news is that if you do not live in a flood zone, flood insurance is relatively inexpensive.
As of February 2013, sample rates for flood insurance in Texas are as follows:
For $100,000 in building coverage with $40,000 in contents coverage, the annual premium is $310.
For $150,000 in building coverage with $60,000 in contents coverage, the annual premium is $354.
For $250,000 in building coverage with $100,000 in contents coverage, the annual premium is $412.
Keep in mind, most homeowners do not necessarily need the same level of flood coverage as dwelling coverage on their homeowner policy. This is because a flood usually does not result in the loss of the entire building structure and all the contents, unlike a fire or tornado. Of course, there are exceptions such as the catastrophic flooding from Hurricane Katrina and other recent floods in the Midwest.