Water damage and flood damage are considered two different types of hazards. All homeowners insurance policies exclude coverage in case the damage was caused by a flood. When two or more acres of normally dry land or two or more properties are inundated with water, a flood has occurred. If a washing machine hose breaks or rain enters the house through the roof or broken window, water damage has occurred and is covered by a homeowners insurance policy.

Compensation for flood damage is provided by a flood insurance policy. Unlike a homeowners insurance policy offered by a private company, this type of policy is available through the federal government. The National Flood Insurance Program (NFIP) is the government entity that provides these policies. The NFIP is administered by the government through the Federal Emergency Management Agency (FEMA). The NFIP works through private insurance companies to help make flood insurance policies available to homeowners and renters. Private insurance companies use property and casualty insurance agents to sell flood insurance policy to homeowners and renters. The cost of the policy for a specific property does not vary from company to company or agent to agent. The main factor that determines the cost of a policy is the location of the property and its risk of flooding as determined by the NFIP. Flood maps are used to predict the risk of flooding in a particular geographic area and the specific elevation of a property further determines the level of risk.

Flood insurance policies provide coverage for buildings and contents. Before a policy takes effect, there is a 30-day waiting period from the date of purchase. Historically, about 25% of flood insurance claims come from low to moderate risk areas. Since premiums are lower in lower-risk areas, homeowners and renters will pay a fair amount for a policy relative to the risk they face from flood damage. For high-risk areas, a mortgage lender is required by federal law to require a property owner to purchase a policy that provides insurance coverage for the building in the event of a flood. content coverage is not part of the requirement.

Just a small amount of flood water can cause many thousands of dollars in damage. All homeowners and renters should carefully consider purchasing a flood insurance policy to protect their building and its contents. Keep in mind that a lender will require a policy only if the property is in a high risk area and only for building coverage. Also, remember that a significant percentage of floods occurs in low-risk areas. Finally, don’t forget the 30-day waiting period before a flood insurance policy kicks in.