What Should You Do If You Have Uninsured Flood Damage? Will FEMA Help?

What Should You Do If You Have Uninsured Flood Damage? Will FEMA Help?

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Flood insurance is the best way to protect yourself against catastrophic losses from flooding. The damage is almost never covered by standard homeowners or renters insurance policies.

But if you don’t have coverage and your home was damaged by flooding, you're not completely without recourse. The federal government provides grants (through FEMA) and loans (through the SBA) that may help you repair flood damage to your home, as well as cover certain other expenses.

FEMA disaster grants

The FEMA Individuals and Households Program, or IHP, grants are available to people whose homes are located in a federally recognized disaster area, which can include flooding. IHP grants provide swift grants to return your house or apartment to a habitable condition after a disaster. Officially, grants can reach up to $33,000, but the payouts tend to be much lower than that — the average grant for houses flooded by Hurricane Sandy in 2012, for example, was $8,016.

These grants are primarily meant to cover expenses not covered by flood insurance. However, everyone may apply, regardless of their income level or whether they have flood insurance. If you have flood insurance, you just have to pay back the grant with flood insurance funds once you receive it.

What does a FEMA IHP grant cover?

If you have no flood insurance, FEMA's IHP grant can help you in a specific set of ways after a flood or other disaster. This includes paying for the cost of repairing the structure of your home and additional living expenses that you incur as a result of being displaced from your home.

Keep in mind that you'll only receive enough money to return your home to habitability, not return it to its pre-disaster condition. It only covers enough to make your home safe to live in.

For example, if your house is flooded in a guest bedroom where no one regularly sleeps, a FEMA grant would not cover the cost of replacing that extra bed. As a result, most people receive far less than the maximum payout of $33,000. This is much less coverage than NFIP flood insurance, which covers up to $250,000 to repair or replace your home and belongings.

Here are some things IHP grants may cover:

  • Repair assistance: You can get money from FEMA to pay for repairs to your home, including its structure, electrical and HVAC systems, and water and sewage. However, you shouldn't expect an IHP grant to cover the full expense of bringing your house back to pre-disaster condition. The goal is simply to make your home habitable again.
  • Temporary housing assistance: Pays for the cost of an apartment or other temporary living arrangement if your house is uninhabitable due to a disaster. These funds are typically allocated in one- to three-month increments, for up to 18 months total after a disaster.
  • Other needs assistance: A few other items can be claimed under an IHP grant. These include medical, dental and funeral expenses, and necessary purchase items related to disaster recovery, like a chainsaw or dehumidifier. You may also be able to claim losses to other personal property, like clothing, but only if you've been denied an SBA loan to pay for them.

Who is eligible for FEMA IHP grants?

IHP grants have specific eligibility requirements. First, only people who live in a federally recognized disaster area can apply. This assignment is made on a case-by-case basis and has specific geographic boundaries, usually set by county.

For example, in the case of Hurricane Michael in 2018, residents of 12 counties in the Florida Panhandle were eligible for individual assistance. If you sustained damage but lived in a different county in Florida, you wouldn't be eligible for an IHP grant.

Additional requirements to qualify for an IHP grant include:

  • The home is inaccessible or uninhabitable due to the disaster.
  • The home is where you live for the majority of the year.
  • You have necessary expenses or needs not covered by insurance or another source.
  • At least one resident must be a U.S. citizen, non-citizen national or otherwise qualified resident.

Finally, if you live in a Special Flood Hazard Area and do not have flood insurance, you will only be allowed to make one IHP claim. After that, you must purchase flood insurance. If you do not, any claims for following disasters will be denied.

Home repair loans from the Small Business Administration

If you exceed the maximum payout for an IHP grant or are ineligible to receive funds, one alternative is a homeowners disaster loan from the Small Business Administration.

Since it's a loan, you will eventually have to pay it back, but they have low interest rates and long repayment periods, up to 30 years. Repayment terms are set on a case-by-case basis and consider your ability to pay.

We recommend applying for an SBA disaster loan if you are eligible, even if you don't think you will use it. You are not obligated to accept the money, and applying may allow you to apply for grant money from FEMA that you would not otherwise be eligible for.

What you can use an SBA disaster loan for

Unlike FEMA IHP grants, SBA loans have fairly broad terms regarding what you're allowed to use the money for. The money can be used to repair or replace both your home and your personal property, including a flooded car, if it is not covered by comprehensive car insurance. The most significant limitation is that you can't use the money to upgrade your home or make additions. You can only use it to return your house to its previous condition.

What it covers
ResidenceRepair or replacement of primary residence to pre-disaster condition$200,000
Personal propertyReplace clothing, furniture, cars, appliances and other property$40,000

Eligibility requirements

SBA disaster relief loans are only available to homeowners whose properties are located in federally declared disaster areas, like FEMA grants. Additionally, you can only use SBA home disaster loans to repair your primary residence, and it won't cover business-related damages — for example, if you have a home office — though you can apply for a separate business disaster loan.

If you can't get a loan elsewhere to help rebuild your home, the interest rate from the SBA offered won't exceed 4%. If you are able to get one from another lender, the maximum is 8%. If you are borrowing more than $25,000, you will likely have to provide some kind of collateral. All borrowers are also required to have a satisfactory credit history and demonstrate the ability to repay the loan within the appropriate time frame.

Private flood insurance has a shorter waiting period

NFIP flood insurance has a 30-day waiting period. You have to wait that long for the coverage to go into effect. If you are concerned about an upcoming storm or rainy season and need coverage sooner, private flood insurance may be able to provide coverage with a shorter waiting period of 10 to 14 days.

Of course, private flood insurance cannot cover you for damage that has already occurred or that happens within your waiting period, and insurers typically stop selling flood insurance if a major storm is imminent.

There are also a few exceptions to the waiting period rule. Both public and private flood insurance goes into effect with no waiting period if you are buying a new property or adding a new mortgage.

But if you've already experienced flood damage, we recommend purchasing flood insurance to protect yourself in the future. You already know your home is at risk for flooding, and there's no reason it could not flood again. In addition, you may be required to purchase coverage to qualify for future grant money from FEMA.

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