Flood Insurance

The typical homeowners policy excludes flooding as a cause of loss.  This is because floods are often catastrophic and localized in nature.  Private insurers simply cannot afford to provide coverage for flood damage because the severity and frequency of losses would put them out of business.  Flooding is a common cause of loss in America and there are floods in all 50 states almost every year.

Seeing the need for a federal program to reduce risks, provide insurance and assist flooding victims, congress created the National Flood Insurance Program in 1968.  Private insurers work with the NFIP to sell flood insurance backed by the federal government and to adjust claims on behalf of the program.  In order to purchase a flood policy, a homeowner must be part of a participating community.  Participating communities must adhere to the NFIP guidelines.

Flood Defined

The National Flood Insurance Program defines flood as:

What if I don’t have flood coverage and the worst happens?

A homeowner without flood coverage that suffers flood damage may qualify for disaster assistance, in the form of a Small Business Administration loan, if the US President declares a disaster.  But this happens in less than 50% of flooding incidents -and the federal loan needs to be repaid with interest.

A $50,000 loan at 4% interest over 30 years will cost $86,400 in total ($240 per month, $2,880 per year)

Compare that with a $100,000 flood policy that costs $33 per month, or $400 per year.  In the event it’s needed to cover flood damage, that $100,000 does not need to be paid back.  The policy always renews, regardless of claims history, and does not rely on the President’s disaster declaration.

Can I sue my insurance company over a flood claim?

There have been multiple suits brought against insurers post hurricane Katrina in various states with no success for homeowner plaintiffs.  The insurers argue their contracts exclude payments for flooding in plain, unambiguous language and the courts have generally agreed.

The preceding information is intended only as a general guide and is taken from various sources.  For information or recommendations specific to your individual situation, seek the advice of a qualified professional.