Flood Insurance: What It Covers, and If You Need It

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Flood insurance protects a structure and its contents from water damage caused by a flood: a temporary condition where two or more acres of normally dry land are inundated by water or mudflow. Floodwaters can be many feet high or 1 inch high, but damaging nonetheless. Homeowners insurance does not cover damages caused by a flood so anyone with a home in an area susceptible to flooding should consider purchasing flood insurance. 

What Does Flood Insurance Cover?

Flood insurance protects two types of property: the structure of your home and the contents. This distinction is made because each have their own deductibles and limits, respectively. Note that flood insurance policies do not cover the land your home sits on. 

The coverage for the structure of your home typically includes: 

  • Foundation
  • Electrical and plumbing
  • Central air systems and furnace
  • Water heaters
  • Refrigerators, cooking stoves and built-in appliances
  • Permanently installed carpeting over unfinished floor

Contents inside your home that can be protected by a flood insurance policy include:

  • Clothing
  • Furniture
  • Electronics 
  • Portable microwaves and portable air conditioners
  • Dishwashers
  • Clothing washers and dryers
  • Carpeting that is not covered as part of the structure

If you purchase a flood insurance policy, make sure you look closely at the individual categories of the contents in your home. It is crucial that you’re aware of the estimated value your items total to for each category and what the limit is for each one. Certain categories might have limits well below the total value of the possessions you own that qualify. For example, artwork and furs generally have a total limit of only about $2,500 - that is, your insurance company will reimburse you up to $2,500 if anything should happen to them. Because of the priceless nature or high value of belongings such as art and fur coats, it wouldn’t take many items (maybe even just one) to go over the limit in this category. If that's the case, you'll want to see if there is additional protection you can buy for those specific categories. 

Exclusions & Limitations to Flood Insurance Policies

Like all insurance policies, there is a list of exclusions that apply to flood insurance. Currency, precious metals and any valuable paperwork are generally not covered by policies. Most self-propelled vehicles, including cars, are not covered either. 

The area of underneath what is typically the first floor in a house or property might only get limited flood insurance protection. Specifically, any areas of a dwelling below the lowest elevated floor (such as a crawl space) and in basements only get certain things insured. For example, in a basement, only the foundation, drywall, insulation, staircases, electrical outlets and switches and central air conditioners are insured when it comes to the stucture coverage of your flood insurance policy. Personal property coverage in the basement is generally limited to clothing washers and dryers, and food freezer (excluding a walk-in freezer) and portable air conditioners.

Most other personal property you might store in your basement will not be covered. For example, clothing, electronic equipment, kitchen supplies, furniture, bookcases, shelving and window treatments will not be covered in the event of a flood if they are stored in the basement. This can be problematic for homeowners who've turned their basement into an entertainment, or home movie theater space.

Do I Need Flood Insurance? 

Whether a homeowner needs flood insurance depends on the risk of a flood where they live, and whether the government or their mortgage lender requires it. Generally, the Federal Emergency Management Agency (FEMA) largely determines if your residence is at-risk of a flood. The agency updates the nation’s Flood Insurance Risk Maps (FIRMs) and partitions them into viewable “panels” online. You can check FEMA's Flood Insurance Rate Map to see what flood zone area your house sits on. Various flood zones are mapped in each panel and each falls into one of three categorical areas below:

High Risk Areas: Known as Special Flood Hazard Areas (SFHAs), there is a 25 percent chance of flooding occurring within a 30-year mortgage of a residence located in these areas. The federal government mandates that all home in these areas with mortgages from federally insured lenders have flood insurance policies. 

Many coastlines are considered to be “high-risk” areas for flooding and the federal government requires properties in those areas to have flood insurance. Lenders might even require a homeowner to have flood insurance policy even if it is not federally mandated in order to protect their own risk in extending you a mortgage. Hurricanes and tropical storms frequently flood coastal regions. Their heavy rains can result in flooding hundreds of miles inland but property near the coastline also is susceptible to a storm surge, or abnormal rise in the astronomical tide. Hurricane Katrina, one of the deadliest hurricanes in U.S. history that killed more than 1,800 people in 2005, had storm surge flooding up to 20 feet above the normal tide. It also is estimated to have caused more than $100 billion in property damage, much of which was due to flooding.

Some regions that might fall into this highest risk category are the Florida panhandle, the coastal regions off the Gulf of Mexico and the Atlantic Coast, areas along the Mississippi River, to even areas of the Rockies, where ice caps on mountains can melt in the spring and cause flood conditions in communities nearby. If you're living in one of these areas, it'd be a great idea to purchase a policy to protect you if it's not already required by your lender or the government. 

Moderate-To-Low Risk Areas: In these areas the likelihood of flooding can be substantially less than high-risk. However, nearly 20 percent of all claims to the National Flood Insurance Program come from this category. Flood insurance is not federally required in these areas but it is still recommended.

Undetermined-Risk Areas: These are areas where no flood analysis has been conducted. This does not mean the areas are without risk of a flood and that uncertainty is usually reflected in the cost of a policy. The majority of the U.S. has been mapped.

FEMA Flood Insurance Rate Map

FEMA flood maps are used by local governments, federal agencies, lending institutions, real estate brokers and insurance companies. Hard copies of the maps should be available for review at your local planning, zoning or engineering office, or you can view and request copies from FEMA online. Just beware that FEMA doesn't include dams in their maps when assessing risk, although the threat of flooding from dams can be severe.

Enter a zip code or address into FEMA's Map Portal, and zoom in until you locate your area, and click to view the map. If your residence is in an area beginning with the label Zone A or Zone V, you're in a high-risk area, and it is highly recommended that you obtain flood insurance. On the other hand, even the same neighborhood might have different flood zones because of factors such as elevation and topography. For example, here's a snapshot of an area of New Orleans in Louisiana near the Mississippi River.

This map shows the different flood zones and risks in New Orleans.

What Causes Floods

Most floods are caused by heavy rain or melting snow that cannot be absorbed into the ground. While those are the primary sources of flooding, heavy rain and melting snow often result in overflow of lakes, rivers and streams which flood nearby areas. There isn't a minimum or threshold of rainfall or snowmelt that must occur to cause a flood. Flood conditions are dependent on a wide variety of circumstances.

The risk of dam failure and a resulting flood is a real one - there are more than 84,000 dams in the U.S. More than one-third of the dams are at least 50 years old and 14,000 of those are considered a “high” hazard to life and property damage if they were to fail. That risk is not considered or shown on the flood maps of the Federal Emergency Management Agency (FEMA). 

For example, your home might not appear in a flood zone mapped by FEMA. But if your home is downstream of a dam and depending on what it’s holding back (maybe the full strength of a stream or a huge reservoir), it could be at serious risk. The Hoover dam in Nevada holds back 10 trillion gallons of water - enough to flood the state of Connecticut about 10 feet.

Construction and new development can change natural drainage of water and potentially cause flooding. Not only are roads and sidewalks impermeable to water, a new absence of trees and vegetation can mean areas where water flows faster and in direction it previously didn’t.

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