Flooding is the most common and costly natural disaster in the United States, causing an average of $50 billion in economic losses each year. Most U.S. natural disasters declared by the President involve flooding.

There is no coverage for flooding in standard homeowners or renters policies or most commercial property insurance policies. Coverage is available in a separate policy from the National Flood Insurance Program (NFIP) and a few private insurers. Despite efforts to publicize this, many people exposed to the risk of floods still fail to purchase flood insurance.

And, in light of the recent devastating floods experienced in the South, we thought it would be essential to shed some light on what flood insurance covers, how it is purchased, and provide an idea on the associated premiums.

WHAT’S COVERED

Building

• The insured building and its foundation
• Electrical and plumbing systems
• Central air conditioning equipment, furnaces, and water heaters
• Refrigerators, cooking stoves, and built-in appliances such as dishwashers
• Permanently installed carpeting over unfinished flooring

Personal Property

• Personal belongings, such as clothing, furniture, and electronic equipment

WHAT’S NOT COVERED

• Damage caused by moisture, mildew, or mold that could have been avoided by the property owner
• Currency, precious metals, and valuable papers such as stock certificates
• Property and belongings outside of an insured building such as trees, plants, wells, septic systems, walks, decks, patios, fences, seawalls, hot tubs, and swimming pools
• Living expenses such as temporary housing

FLOOD INSURANCE FOR BASEMENTS AND AREAS BELOW THE LOWEST ELEVATED FLOOR

Coverage is limited in basements regardless of zone or date of construction. It’s also limited in areas below the lowest elevated floor, depending on the flood zone and construction date. These areas include:

• Basements
• Crawl spaces under an elevated building
• Enclosed areas beneath buildings elevated on full-story foundation walls that are sometimes referred to as “walkout basements.”
• Enclosed areas under other types of elevated buildings

MANDATORY REQUIREMENTS

Homes and businesses with mortgages from federally regulated or insured lenders in high-risk flood areas must have flood insurance. While flood insurance is not federally required if you live in a moderate-to-low-risk flood area, it is still available and strongly recommended.

RATES

The NFIP, a federal program, offers flood insurance, which can be purchased through most leading insurance companies. Rates are set and do not differ from company to company.

These rates depend on several factors, including the date and type of construction of your home, along with your area’s level of risk. Most premiums include a Federal Policy Fee and ICC Premium. If your community participates in the Community Rating System (CRS), you may qualify for an insurance premium discount in some communities of up to 45% if you live in a high-risk area and up to 10% moderate-to-low risk areas.
30-DAY WAITING PERIOD

Typically, there’s a 30-day waiting period from the date of purchase before your policy goes into effect. Here are the only exceptions:

• If flood insurance is being purchased connected with the making, increasing, extending, or renewing your loan.
• If a building has been newly designated in the SFHA and flood insurance is purchased within the 13-month period following a map revision.
• If flood insurance is required due to a lender determining that a loan that does not have flood insurance coverage should be protected by flood insurance.
• If an additional amount of insurance is selected as an option on the renewal bill.
• If a property is affected by flooding on burned Federal land resulting from or is exacerbated by post-wildfire conditions when the policy is purchased within 60 days of the fire containment date.