How Can I Buy Flood Insurance?
With all the media coverage from Hurricane Harvey (2017) and thinking about the approaching Hurricane Irma, I thought to advise people about Flood Insurance. Based upon our other article about Flood and if it is covered by your homeowners policy, it would be smart to provide info to people about how to buy flood insurance.
Even though you may not be in a flood zone, please consider purchasing. Similar to our discussion on Earthquake.
A little about Flood Insurance below:
Whats Covered?
Please talk to a licensed insurance agent about what is and isn’t covered by your policy.
- The cause of the flooding matters. Damage caused by a sewer backup is only covered by flood insurance if it’s a direct result of flooding; the damage is not covered if the backup is caused by some other problem. For a complete summary of coverage, go to What’s Covered.
- Coverage for your building and contents. Contents and building coverage are purchased separately (for the Preferred Risk Policy, there’s an option for combination coverage for both contents and building coverage), but there are always separate deductibles. Unless you have contents coverage, your flood-damaged contents are not covered.
It may be a good idea to purchase coverage for Building (the structure) and its Contents. And each has a deductible. Building coverage only covers the structure, so you should consider getting coverage for the items inside the property too (Contents coverage).
- Building property
- The insured building and its foundation
- Electrical and plumbing systems
- Central air-conditioning equipment, furnaces, and water heaters
- Refrigerators, cooking stoves, and built-in appliances such as dishwashers
- Permanently installed carpeting over unfinished flooring
- Permanently installed paneling, wallboard, bookcases, and cabinets
- Window blinds
- Detachted garages
- Debris removal
- Personal contents property*
- Personal belongings such as closing, furniture and electronic equipment*
- Curtains*
- Portable and window air-conditioners*
- Portable microwave ovens and portable dishwashers*
- Carpets that are not included in building coverage*
- Clothing washers and dryers*
- Food freequers and the food in them
- Certain valuable items such as original artwork and furs (up to $2,500)*
NOTE: An asterisk (*) at the end of the bullet means it is covered by a Contents policy
Deductibles
Deductibles apply separately to building and contents with different amounts to choose. (Remember to ask an agent if your contents are covered, as building coverage is only for the structure). As with other insurance plans, a higher deductible will lower the premium you pay but will also reduce your claim payment, meaning you will need to cover the difference out of your own pocket. Sometimes a mortgage lender will set a maximum amount for your deductible.
Waiting period
Typically, there’s a 30-day waiting period from date of purchase until your policy goes into effect. Don’t let it stop you, even with an approaching hurricane you might not get hit, and one could follow 31 days later.
Here are the exceptions:
- If a building is newly designated in the high-risk Special Flood Hazard Area (SFHA) and you purchase flood insurance within the 13-month period following a map revision, there is a 1-day waiting period.
- If you purchase flood insurance in connection with making, increasing, extending, or renewing your mortgage loan, there is no waiting period.
- If you select additional insurance as an option on your insurance policy renewal bill, there is no waiting period.
- If a property is affected by flooding on burned Federal land and the policy is purchased within 60 days of the fire-containment date, there may be no waiting period. Waiving of the waiting period is determined at the time of claim.
How to Buy
You can only purchase flood insurance through an insurance agent or an insurer participating in the NFIP. You cannot buy it directly from the National Flood Insurance Program (NFIP). If your insurance agent does not sell flood insurance, you can contact the NFIP Referral Call Center at 1-800-427-4661 to request an agent referral.
Things may change over time with private carriers appetite or competition in this market, but at this time NFIP is the only game in town. There are private carriers who will provide excess flood coverage above NFIP. Something to consider.
Thoughts
As a Millennial with a home and rental property, I am concerned about the risks that I am not required to purchase mandatory coverage. For my concern two examples include: the Earthquake and flood losses in the NY region. Although lower probability than high risk areas, these excluded perils are direct exposure to my Net worth.
It is natural to underestimate the probability of something bad occurring, but it is a big mistake to be wrong.
I will get into the actuarial pricing of the NFIP vs. what private insurers would charge, but keep in mind the pricing is a good deal. Please consider buying even if you think it is overpriced, many believe it is not…
