The Walters Agency Podcast

The Water's Rising: Are You Financially Protected?

• Timothy Walters • Episode 5

Share episode

What Is Flood Insurance, And How Does It Differ From Homeowners Insurance? 

A dangerous misconception could leave your home completely unprotected when disaster strikes. As Timothy Walters reveals standard homeowners insurance policies simply don't cover flooding—a harsh reality many East Tennessee and Western North Carolina residents learned the devastating way after Hurricane Helene.

"We all live in a flood zone," Walters emphasizes, challenging the common belief that only certain areas need flood protection. This critical distinction became painfully clear when countless homeowners discovered their regular insurance wouldn't cover a penny of flood damage. The conversation dives deep into what exactly constitutes "flood damage" versus regular water damage, explaining why a burst pipe that floods your basement is covered while rising river water that does the same damage isn't.

Walters breaks down the two primary flood insurance options available to homeowners: private market insurance (which often provides more robust coverage at better rates) and the government's FEMA program (which may be the only option in certain high-risk locations). He explains the coverage limitations of each, highlighting that private insurance typically allows for full replacement value coverage while FEMA programs impose caps that might leave high-value homes underprotected. 

Whether you live in a traditionally flood-prone area or somewhere you'd never expect flooding to occur, this episode delivers essential information that could protect your biggest investment. Listen now and discover if you're truly covered before the waters rise. Then subscribe to The Walters Agency podcast for more expert insurance guidance that cuts through confusion and saves you money.

To learn more about The Walters Agency visit:
https://www.brightway.com/agencies/tn/knoxville/0237/team
The Walters Agency
7009 Asheville Hwy
Knoxville, TN 37924
423-417-2070

Speaker 1:

Many homeowners believe their standard insurance policy covers flooding, but it usually doesn't. Timothy Walters explains what flood insurance actually is, who needs it and why it matters, even outside high-risk areas. Welcome back everyone. Skip Mahoney, co-host, slash producer, back in the studio with Timothy Walters, licensed insurance agent and owner of the Walters Agency. Timothy, how's it going, man?

Speaker 2:

It's going very well. Got my feet dry.

Speaker 1:

There you go. That's a good thing, and your socks too, hopefully.

Speaker 2:

Oh baby.

Speaker 1:

Well, timothy, one thing that is on a lot of people's mind, especially here in East Tennessee, western North Carolina flood insurance is a big deal. We just had the hurricane Helene come through last year and wreaked havoc in an area that normally doesn't. You know, people that live here don't even think about flood insurance, and tons and tons of homes were completely destroyed and no flood insurance. So I thought it would be appropriate. What is flood insurance exactly and why do we need it?

Speaker 2:

Well, yeah, in hurricane hell lane yeah.

Speaker 2:

That was God awful and everybody who lives around here doesn't need to be told about it. Yeah, I think it was hopefully a wake up call for a lot of people. We have this habit and I talk to people about this all the time. You have the people have this habit in East Tennessee and Western North Carolina, even in Southeast Kentucky, where they get regular flooding because we don't have the TVA control systems up there. They say, oh yeah, I live on a hill or I live above the flood plain.

Speaker 2:

And I always tell people I say we all live in a flood zone, all of us. I don't care if you're on the top of Mount Everest, you're in a flood zone, all of us. You know I don't care if you're on top of Mount Everest, you're in a flood zone. Now, you know, if you're in a high enough flood zone and it floods, we're probably not gonna be worried about insurance.

Speaker 2:

But most of us live in places where if there is a flood and it does affect our properties, if we don't have the correct coverage, then it's gonna, it's gonna eat into our pockets, right? We don't have that risk mitigation. So flood insurance again, it's a clear misconception. A lot of people assume that if there's a flood, which means water rising out of a river, a lake or perhaps even heavy rain pulling up somewhere against the structure of your house, natural water is typically not gonna be covered under your regular homeowners insurance and that's the insurance that's gonna be required by your mortgage company. Most mortgage companies that I know of do not require flood insurance unless you are in a high risk zone.

Speaker 1:

Even this I'm done. Why is that?

Speaker 2:

You have to ask a mortgage guy. I'm not sure. I think probably because, probably because Floods, although they do cause a lot of damage, especially catastrophic damage, you know, from hurricanes and that kind of thing I don't think they're considered a common cause of loss across the entire country. You're probably less likely to have catastrophic flood damage in Nebraska, for instance just to pick a place I think is dry than, say, coastal Florida. The lenders down in coastal Florida they're definitely going to require flood insurance, Maybe not so much Nebraska and not so much historically here in Tennessee, Although I have noticed an uptick in lenders asking for flood insurance in this state.

Speaker 2:

But yeah, it's not typically going to be something that's covered in your regular homeowners insurance policy. It has to be purchased separately and there's two markets for it. There's a private market flood insurance which we do. There's great companies. It typically provides more robust coverage and, you know, a lot of times it's less expensive than the government FEMA program. But the FEMA program it doesn't have as many restrictions and, depending on the location, it may be the only flood insurance available. So it's much more common for people in the coastal areas to have FEMA, the government program, than the private flood programs.

Speaker 2:

Most agents who are licensed and are able to quote flood insurance. They'll have access to both the private markets and the FEMA market. Actually, there's private insurance companies that basically write the FEMA policies and manage them, but of course, if they are used, the money comes from the government, the feds, or the taxpayers, as I like to say. So flood insurance is there. It's not because the pot busted your house and flooded your basement. That should be covered under your regular homeowner's policy. If the river floods over its banks and wipes out the bottom half of your house, then that's covered under your flood insurance.

Speaker 1:

So typically water damage that comes from a river, a lake, dam, busting that kind of thing or a hurricane is considered that. But that's good to know. If I have a hot water heater that explodes in the basement and floods the basement, that's covered.

Speaker 2:

Well, yeah, I mean that's not going to be covered under a FEMA flood program. That's going to probably be covered under your regular homeowner's policy. But you want to check your policy first because sometimes there can be some funny exclusions depending on what you're buying. So it's always a good question to ask what perils are covered in your policy.

Speaker 2:

Because there's always exclusions, you know, and there's always stipulations, you know. Insurance is a contract and I don't think most reasonable people try to understand the contracts they sign, but a lot of times we get in a hurry and maybe don't read them as close as we should or don't ask questions when we have the opportunity. So if you have a good insurance agent, you know, ask them. Honestly speaking, for myself and a lot of my people who I know are in this business, we like it when people ask us these questions, because we either know the answer and we can educate them, or maybe we're not sure and we got to ask and that improves our knowledge and make sure that we're taking care of our clients. So never, never, feel you shouldn't be asking these questions. Some people they ask me questions. They almost apologetic about it.

Speaker 1:

No, please, please, ask me these questions well, I got to tell you, as a consumer, I'm embarrassed that I didn't ask more questions. When I moved into this house five years ago, I thought homeowners insurance is pretty standard, you know and this is a good guy that somebody referred and I got him, not necessarily having to do with flood insurance, but with roof, which we talked about in a different episode. But it's a good thing I'm with you on this podcast because I'm taking good notes.

Speaker 2:

My next insurance company is going to be I. I'm gonna pelt them with a lot of questions.

Speaker 1:

Hey man, we'll have you licensed before you know it, there we go, there we go. What is flood insurance? Something that renters should also be considering.

Speaker 2:

You know, not really, because you know flood insurance is really more for the property owners. It's for covering damage to the house or to the own property of the property owner. So, a renter, if you have renter's insurance, you know you can have a renter's insurance policy which is going to cover your personal property and your personal liability at the rented location, but it's not going to cover, of course, the landlord's policy. It's not going to cover damage to the structure of the house. So I'm trying to think I don't think anybody's ever even asked me about flood insurance for renters, tenants. That's something I hey talk about, things you're not sure about. I'm going to have to go and ask, I'm going to have to ask some questions. That might be something I can educate myself about.

Speaker 1:

There we go. It's an interesting question too, because if you're a renter, you would assume that your landlord would have some sort of coverage for you. But if you don't have renter's insurance and there's a flood and it destroys your personal property, I don't think your landlord's liable for that is he?

Speaker 2:

No, no, Landlord. Yeah, your stuff is your stuff. Your landlord has no responsibility for it.

Speaker 1:

Wow.

Speaker 2:

The landlord's responsibility is for the property. If the house is damaged, hopefully they're going to have a policy in place that's going to repair or replace the damage to the house. But if their tenant's property is damaged, honestly, unless the landlord deliberately caused the damage, that's none of their business.

Speaker 1:

There's a very clear demarcation the separation between the renter's stuff and the landlord's stuff, gotcha. Well, what about premiums and premiums and limits typically structured for flood insurance?

Speaker 2:

How are they structured Well. So we're talking about the private flood insurance. I like better because there's no arbitrary cap on the coverage you can have for a house. There is a cap for what the FEMA program will provide for one individual house, whereas the private flood insurance markets will typically allow you to get coverage up to the full replacement value of the property. So if you have a property, the calculated replacement value is half a million dollars, you're not going to be able to get that covered fully under the FEMA program, but you can probably find a private flood market that will cover that for you of the property owner.

Speaker 2:

So if you have furniture or other possessions in the house, you can actually add on to. It's an endorsement. It's not typically automatically included in our flood policy, but you can actually add on. So if you have, for instance, a house in a flood area that you want to have covered but you also have a bunch of furniture in there that you want to protect from a flood damage, then you can add that coverage on there. It just costs an extra or a lot extra depending on how much coverage you're asking for.

Speaker 1:

Wow, well, I'm glad I asked the question. Flood insurance is a very deep subject that we could talk about forever, so maybe we can revisit flood insurance in a future episode.

Speaker 2:

I like what you did there. It's a deep subject.

Speaker 1:

It can be. Oh yeah, pun intended, pun intended. Well, anyway, love it, timothy. Appreciate your expertise. You're helping this guy out and hopefully a bunch of our listeners as well.

Speaker 2:

It's like anything else. More informed consumers can only help the markets and as an insurance guy, as a guy who's been doing this a long time, I want my clients and the broader public to be more educated about what insurance is and what it isn't, Because there's a lot of misunderstandings about what it is and that causes more aggravation for everybody. So we try and do what we can to get that clear.

Speaker 1:

Absolutely, and, as a note to our listeners, keep listening to the Walters Agency podcast. You'll learn some very valuable stuff. That's going to save you some bucks, tim. Thanks so much. We will see you in the next episode.

Speaker 2:

See you then.

Speaker 1:

All right.