By: Ken Roach
25 Year Insurance Professional
1. Flood coverage is almost always excluded under your standard residential and commercial property insurance policy.
Floods are a disaster for just about any property owner. A Flood is defined by the National Flood Insurance Program as; A general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or 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 ... as a result of erosion or undermining caused by waves or currents of water ... that result in a flood as defined above.
Understanding the definition of flood is very important because almost all standard property insurance policies exclude floods and offer no coverage for damages directly caused by a flood. While there can be coverages extended to property indirectly damaged by a flood, those can be several limited.
2. Flood Insurance has a waiting period.
Depending on your property's flood zone determination, coverage can be purchased in either the private or public market. There are many private insurers that underwrite and offer their own private insurance coverage. Usually, these insurers have a cap of overall market exposure which does limit availability. Public sector flood insurance is subsidized by the federal government and administered through FEMA. This is where almost all policies are placed that are located in high-risk special flood hazard areas.
Both private and public insurers require a 30-day waiting period before coverages activate on their standard insurance policies. Note: They are exceptions to this waiting period. Private insurers can and will offer a shorter waiting period for property located in non-Special Flood Hazard Areas. Also, if you are purchasing the property new or simply changing flood insurance to a new policy, the waiting period is waived. However, there is a short time frame for you executive this waiver exception.
3. The Coverage Limits
The flood insurance policy is different than the standard property insurance policy. Not going into all the differences in coverages, exclusions, types of property, etc...; it is essential to know the overall coverage limits. There are maximum limits available through the public sector program as authorized by Congress. The maximum limit for all one- to four-family residential buildings is $250,000, and contents coverage is limited to $100,000.
The maximum coverage limit for non-condominium residential buildings with five or more units (classified as Other Residential) is $500,000 with a contents maximum limit of $100,000.
For Non-Residential Business and Other Non-Residential buildings, the maximums are $500,000 each for building and contents. Note: *Available limits for the entry-level Emergency Program communities are much lower; your flood determination will indicate if this applies to you. These limits can vary slightly within the private sector insurers but generally stay consistent with the public sector. On a good note, you can purchase excess coverage through private insurers if you need more coverage.