With natural disasters like wildfires and floods on the increase, questions arise about what your insurance covers as a result of damage from these events. While coverage on these two can overlap, this article will concentrate on flood insurance, since this week we are remembering the Great Flood of 2013 which hit Lyons in September. Here are a few things to consider:
Don’t over or under insure your home.
If your home is destroyed by fire or an event other than a flood, your insurance will pay for the reconstruction cost to rebuild your home, not reimburse you for the market value. With high home sales prices it’s not uncommon for a home that is worth $400,000 on the market having a reconstruction cost of half that. Most policies have a 20% factor above the insured dwelling amount to cover excess rebuilding costs.
Insurance companies get quarterly updates with current material and labor costs so it’s wise to ask your agent if the construction cost estimate for your home is current. There have been severe upswings in material costs, as well as labor shortages, which can affect this estimate more often than usual.
Other structures not attached to your home like detached garages, sheds, outbuildings, and fences are usually covered at 10% of the dwelling coverage amount.
FEMA Definition of Flood:
• A general and temporary condition of partial or
complete inundation of 2 or more acres of normally
dry land area or of 2 or more properties (at least 1 of
which is the policyholder’s property) from:
º Overflow of inland or tidal waters;
º Unusual and rapid accumulation or runoff of
surface waters from any source; or
º Mudflow; or
• Collapse or subsidence of land along the shore of a
lake or 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 above.
If an errant drone crashes into your roof during a rainstorm and the water coming through the hole causes extensive damages to the interior, this is covered by your homeowner’s policy as is a burst pipe or blown water heater.
But, if a rainstorm causes a torrent of water on the ground to rush into and damage your home, that will not be covered. In that case you will need flood insurance.
Most flood policies are underwritten and administered by NFIP (National Flood Insurance Program) in concert with FEMA. If you have a policy through your homeowner’s insurance company, it’s probably one of these.
Flood policies have specific coverage limits and specific limitations. The maximum coverage amount for a home is $250,000 and $100,000 for contents. There are excess coverage amounts available for some properties.
Coverage for basements and crawlspaces does not cover furniture or contents other than mechanicals; water heaters, a/c units, pumps, refrigerators, etc. However, coverage is included for carpeting and replacement of drywall. The drywall coverage excludes taping and painting. You can refer to the NFIP manual online at Floodsmart.gov for more detail.
The policies do not cover additional living expenses which pays for a place to stay if your home is uninhabitable. Your homeowner’s policy has this provision for other disasters, but it won’t cover loss by flood.
The premium for these policies is based on the FIRM (Flood Insurance Rate Map) which is redrawn every few years as well as any changes to the flood zone rating. A rating of AE means your home is in a Special Flood Hazard Area (SFHA) which has a higher likelihood of flood. Or, preferred zone is X. You can find your community flood zone map at: msc.fema.gov/portal/home.
For general information about NFIP go to: floodsmart.gov. There is a 30 day waiting period for the policy to take effect except for a “lender-required policy” to obtain a mortgage loan.
There are private insurance flood policies that have entered the market issued by companies like Zurich, Assurant, and Lloyds. The policies operate outside FEMA and may offer higher dwelling and contents coverage as well as additional living expense coverage. The increased benefits do come with increased premium cost.
Read your policy
Finally, even though it elicits a groan, read your policy! Policy booklets come with definitions of what is covered and to what extent. Talk to your agent if you have any questions. Review all your policies annually.
During your review, your agent may suggest adding more coverage endorsements to your policy. This can raise your premium. You can lower your premium by increasing your deductible. And, be sure to ask your agent about “actual cash value” vs. “replacement cost.”