You don’t necessarily need to live near the water to experience flooding, nearly any home in western Wisconsin can be subject to a flood given the right conditions. It also might surprise you to learn that standard, or even premium homeowners insurance policies don’t cover losses due to flood. In order to be protected from losses due to flood, you have to purchase a separate flood insurance policy.
What Does Flood Insurance Cover?
Flood insurance protects two types of insurable property: your building and its contents. However, your land is excluded from coverage, so any damage to grass, trees, or landscaping is not covered. Structural coverage includes the building, foundation, floors, walls, electrical, plumbing, appliances, and heating and cooling units. Possessions that are covered include clothing, furniture, electronics, furnishings, accessories and more.
As with all insurance policies, it’s important to understand what your policy covers – and what it doesn’t. A flood is defined as: “A general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties (at least one of which is your property) from: Overflow of inland or tidal waters; Unusual and rapid accumulation or runoff of surface waters from any source; 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.” With that understanding, water damage due to broken pipes or a sewer backup would not be covered by flood insurance, but rather by homeowners insurance with proper endorsements.
How to Get Flood Insurance
Flood insurance is made available through the National Flood Insurance Program (NFIP) and is administered by the Federal Emergency Management Agency (FEMA). In order to qualify for flood insurance, the home or business must be in a community that has joined the NFIP. While it is optional for many homeowners, it is required if the mortgage originates from federally regulated or insured lenders, and your home is located in a high-risk flood area.
When you choose your policy, you will have a few options.
- Coverage can be purchased for your structure, contents, or both
- Coverage amounts can range from $50,000 to $500,000 individually for your structure and contents.
- Deductibles can range from as little as $1,000, to as high as $10,000. Keep in mind that there is a separate deductible for both your structure and contents.
- Contents coverage has the option of two reimbursement methods:
- Replacement Cost Value (RCV)
- Actual Cash Value (ACV)
Homeowners, renters, and business owners can purchase these policies from local insurance agents. Because it is a national program, rates are set nationally and will be the same regardless of the agency from which you buy it. These rates depend on a variety of factors, including the construction date and type of property, along with the building’s level of risk. Discounts are available if the city you live in participates in the Community Rating System (CRS), which recognizes communities that are exceeding federal floodplain management practice requirements. More than 1,200 communities from all 50 states participate in the CRS.
Typically, there’s a 30-day waiting period from date of purchase before your policy goes into effect, though there are some exceptions for certain situations. Additionally, payment for your policy must be made for the full year’s premium.
Are You Covered? Should You Be?
Now that you know what flood insurance is and where you can get it, take the time to consider your risk of flood, and whether or not you could financially survive a flood loss. Remember, flooding can happen to almost anyone. You don’t have to live next to a river or lake to be at risk.