By the end of the century, climate change could cost the western U.S. up to $3.2 billion yearly in flood damage. That’s according to a University of California, San Diego study published in 2022. The researchers also said it’s three times higher than their 2019 estimate.
That highlights how flood insurance has become even more vital now. Without it, your home, property, and finances are at considerable risk of severe losses.
To that end, we created this flood insurance guide to highlight its importance. Read on to discover how this coverage can benefit you and why you need it ASAP.
Homeowner’s Insurance Doesn’t Cover Flood Damage
Standard homeowner’s insurance policies only help cover accidental or sudden water discharge. These include indoor flooding caused by a burst plumbing pipe. Another is a water leak resulting from a defective appliance, such as a washing machine.
Standard homeowner’s insurance excludes damage caused by natural disasters. That includes the losses your home might incur due to a flood-bringing storm.
So without flood coverage, you’d have to shoulder the cost of flood-related damage to your home.
It May Be a Federal Requirement
Flood insurance is mandatory for some homes with federally backed or regulated mortgages. These include homes located in Special Flood Hazard Areas (SFHAs). These places, in turn, have a 1% annual chance of flooding.
For example, suppose you have an active Federal Housing Administration-backed mortgage. Let’s also say that your house is in an SFHA.
In that case, the federal government requires you to buy a specific type of flood coverage. Depending on your home’s location, it can be a zone A, zone AH, or zone AE flood insurance policy.
That rule also applies to homes with a mortgage backed by the Department of Agriculture. The same goes for properties financed with a Department of Veterans Affairs (VA) loan.
Floods Can Damage Homes Outside the SFHA
The Federal Emergency Management Agency (FEMA) designates homes in SFHAs. It does so by creating, maintaining, and using flood maps.
FEMA’s flood maps are the standard tools used by homeowners to gauge their flood risk. But, unfortunately, they’re out-of-date.
A chief reason is that FEMA’s flood maps don’t reflect the impact of climate change. And one such effect is by making more homes susceptible to flooding.
Also, FEMA’s maps only include 221,000 square miles of areas with a high probability of flood damage. However, researchers say such risks affect over 1 million square miles. This means far more people are in danger and unaware of it.
That makes flood insurance crucial even if your home isn’t in an SFHA.
Covers Exorbitant Flood Damage Costs
One inch of flood water can already cause damages amounting to $25,000. That’s already a lot, but many flooding incidents do more harm than that. So if your home gets flooded with four inches of water, you’re looking at a loss of at least $100,000.
Flood insurance benefits you and your finances by paying for damages caused by a flood. Floods can result from hurricanes, typhoons, or even heavy or prolonged rain.
Flood coverage can also help pay for damages caused by a sewer backup overtaxed by rainwater.
Helps Pay for Damaged Building Components
Most flood insurance policies come from the National Flood Insurance Program (NFIP). It’s a federally backed program with over 20,300 participating communities.
NFIP flood insurance is usually a two-part policy, with the first being for the building. The building coverage helps pay for the repairs of flood-damaged components, including:
- Detached garages
- Foundation walls
- Electrical and plumbing systems
- Furnaces and water heaters
- Essential appliances like refrigerators and cooking stoves
- Built-in appliances such as dishwashers
- Permanently installed carpeting and cabinets
If you have a solar energy system at home, it’s also a covered inclusion in NFIP flood insurance. Likewise, the coverage applies to window blinds, well water tanks, and pumps.
However, note that the maximum building coverage amount is only $250,000. If that isn’t enough, consider purchasing additional coverage through a private insurer.
Can Help Protect Your Personal Belongings
The second part of an NFIP flood insurance policy is personal contents coverage. This helps pay for the repairs or replacement of damaged items.
Personal contents covered include clothing, curtains, and furniture. The coverage also protects electronics and portable appliances (e.g., microwave ovens).
Valuables, like art, antiques, and fur, are other covered items. However, the maximum payout for these is $2,500.
All in all, the maximum limit of this coverage is $100,000. Anything beyond that is up to you. Fortunately, you can purchase additional coverage through a private insurer.
Floods Are Becoming More Common
In many places in the U.S., floods have become at least five times more common than in the 1950s. In other areas, the increase in frequency is less dramatic but increasing nonetheless.
Either way, the more flooding incidents that occur, the more often a home can suffer from a flood.
Even worse, flood severity is worsening. This means that higher levels of water now inundate lands. And as mentioned above, the more water that floods a home, the greater the damage it sustains.
That highlights how critical flood insurance is to everyone, not only those in SFHAs. After all, the more water that could reach or fall on land, the farther the floods can reach. So, even if your home is far from the coast, a severe flood can still infiltrate it.
Purchase Flood Insurance ASAP
As you learned in this guide, flood insurance is a policy that all, if not everyone, shouldn’t go without. The fact that flooding is becoming more common and severe is a good enough reason. And if that’s not enough, remember that one inch of flood water can already lead to $25,000 in damage.
Thus, if you don’t have flood coverage yet, please consider purchasing one as soon as possible. The sooner you do, the sooner you can protect everything you value.
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