What does flood insurance cover?| S2 Episode 5 | No Dumb Questions

Flooding is one of the biggest perils home insurance DOESN’T cover, but many homeowners don’t know this. Join Sara and Julia to learn:

• How flood insurance works
• When it kicks in and when it doesn’t
• How to get flood insurance
• How to save on flood insurance 

Flood insurance may seem like another large expense, but it’s one of the most important coverages you can get!

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Disclaimer: This podcast is produced by Insurify and is intended for educational purposes only. We are not licensed insurance agents, and we do not constitute personalized financial or legal advice. Personal situations vary, and you should always consult a licensed professional before making financial decisions.

Transcript

SPEAKER_01 0:10

Welcome back to No Dumb Questions, Insure Finds Podcast, where we give you straight talk on coverage, claims, and savings. And I'm Sarah.

SPEAKER_02 0:16

And I'm Julia, and today's topic is flood insurance.

SPEAKER_01 0:20

Which, quick reminder, if you listen to our last episode about apparels, is not covered by standard home insurance.

SPEAKER_02 0:27

Yeah, this is definitely one of those, wait, do you mean that's not covered situation?

SPEAKER_01 0:31

Yeah, yeah. So we're gonna talk today about what flood insurance actually covers, do you actually need it, and what does it really mean?

SPEAKER_02 0:38

Yes, especially if you live in a flood plain and or you don't know that you do.

SPEAKER_01 0:42

Yeah, yeah. And just one inch of flood water can cause over $25,000 in damage.

SPEAKER_02 0:48

Ouch. Big ouch. Oh yeah. Here's what you need to know about flood insurance and if it's worth the money. Yeah. So in short, flood insurance covers damage from rising water entering your home.

SPEAKER_01 1:05

Exactly. Think like heavy rain, storm surge, overflowing rivers, that kind of thing.

SPEAKER_02 1:10

Yes. And it typically covers the structure of your home and some of your belongings.

SPEAKER_01 1:15

Yes, but not everything, and definitely not automatically. Like it doesn't cover burst pipes or leaky roofs. Yes.

SPEAKER_02 1:22

Um, and it's not usually required by a mortgage lender in the same way that home insurance usually is, um, unless you live in a specific federally designated special flood hazard area or SFHA. Yes. Super fun to say. Um, and you can find your risk level actually by using a FEMA flood map. You can actually enter your address and you can figure out where you are.

SPEAKER_01 1:47

Yes. And you can get coverage through either a private insurer or FEMA's national flood insurance program, which is called the NFIP.

SPEAKER_02 1:53

Yes. Um, and remember, this is never included in a standard home insurance policy. This will always have to be another coverage.

SPEAKER_01 2:00

For sure. Let's get into this a little bit more. Sounds good. All right. Let's deep dive into the pool of flood insurance. That was good. That was so bad, but I loved it. Okay. Okay, so it covers two main buckets, which is building coverage and contents coverage.

SPEAKER_02 2:17

Yes. And building or structure coverage, which we've talked a little bit about with home insurance, means the foundation of your home, um, electrical and plumbing systems, HVAC, water heaters, built-in appliances, et cetera.

SPEAKER_01 2:29

Et cetera, yeah. And then that contents coverage is your like personal belonging. Right. That's your furniture, your clothing, electronics, washer and dryer, et cetera.

SPEAKER_02 2:36

Yes. And flood insurance specifically protects you against direct physical losses. So that means a loss that's caused directly by flood.

SPEAKER_01 2:45

Exactly. So flood insurance doesn't cover a lot of things. Yes. So we're gonna get into it really quick and it might be a little bit jargony. Stay with us. Yes, yeah. Um, so what's not covered is sewer backup, and sewer backup isn't covered by your standard home insurance either. That's like an add-on that you can add. Water or moisture damage caused by an issue affecting only one property. Um, losses related to a homeowner's failure to take reasonable measures to protect their home after a flood. So this is like if your basement floods and you get mold because you didn't like clear it out quick enough or you didn't put like a dehumidifier down there, that's not covered. Right. And then losses already in progress when the policy goes to effect. Right. So if you have a flood in your basement and then you get flood insurance after that started, it's not covered. It would only cover new flooding. Correct.

SPEAKER_02 3:33

And often with NFIT policies, there's usually a waiting period. Yes. So keep in mind. So even if you're like, oh no, a storm's a common, um, you might need a little bit more time between you and that storm to have coverage.

SPEAKER_01 3:44

For sure. So yeah, this perfectly leads into my example. Ametha. Which is a hurricane causes a storm storage, which floods your home. Happens very often. But you don't have flood insurance. And even if you get a policy post-storm, insurance doesn't kick in retroactively to cover the damage from that original storm.

SPEAKER_02 4:01

If only, right?

SPEAKER_01 4:02

If only, right?

SPEAKER_02 4:03

Yes. And again, regular homeowners' policies do not and will never cover flooding. This is a separate policy. Yes.

SPEAKER_01 4:12

So as flood insurance is very specific, the definition of a flood is also very specific. Yes. So flooding is defined as two or more properties or acres of normally dry land that are partially or completely submerged by water. Basically, an area that isn't some supposed to be submerged by water is now submerged by water.

SPEAKER_02 4:33

That's they should add that to the official website. Yeah, like that. Okay, so what that could look like. Um a river over overflowing its banks, flooding land or a home, covered. A storm surge, right? Tides getting higher, flooding a home on the coast, covered. Mud flows caused by flooding, covered. Quick surface water runoff, that can also be covered. And collapse or sinking of land along a body of water, things like erosion, that can also be covered.

SPEAKER_01 5:04

But what's not covered is definitely a pipe burst that is not covered by flood insurance. That's your homeowner's insurance.

SPEAKER_02 5:10

Yes, so true. This is where FEMA flood maps come in. So can you tell me what's FEMA?

SPEAKER_01 5:17

So FEMA is the federal emergency management agency. They're a federal agency that manages disaster response and flood risk, but disaster response to like all kinds of disasters, not just flooding and hurricanes and stuff.

SPEAKER_02 5:29

Yes, an important distinction. Um, and one of the important things they do is they create flood maps that show where in the US the high-risk flood zones are, where there's moderate risk and where there's low risk.

SPEAKER_01 5:40

Yes. So if you're in a flood plain, which is classified as a high risk zone, your mortgage lender may require you to carry flood insurance. Right. Um, but overall, it's truly not as simple as like living near water or not. You can be in a high-risk flood zone and not live by any large body of water.

SPEAKER_02 5:56

Yes, that is correct. And another important thing here is rivers. People often underestimate, you know, what a bad like rain, spell, or flood can happen with a river. So yeah, even if you're not not near the ocean, an important thing. So most flood insurance policies come from the National Flood Insurance Program, which is a program run by FEMA. And it provides standardized coverage for your home and your belongings. Um, one thing to note here though is that in order to get flood insurance coverage through the NFIP, your community actually has to meet certain federal guidelines and essentially they have to participate in the program. Yes. Um, so your agent will be able to tell you whether or not you're eligible to buy NFIP flood insurance. And if you're not, if for some reason your community isn't participating, that's actually something you can chat with local reps about if you think that should change.

SPEAKER_01 6:48

Yes. And if not, you can get private insurance as well.

SPEAKER_02 6:50

Exactly.

SPEAKER_01 6:51

Yeah. So the typical limits are around $250,000 for your structure and then $100,000 for belongings.

SPEAKER_02 6:58

Yes, but always, always home inventory and make sure you're getting the right coverage for what your home will actually cost to fix. Yes. Yeah. Um, and like you just mentioned, an alternative to the NFIB is of course private flood insurance.

SPEAKER_01 7:11

Yeah. So this can offer higher coverage limits and more flexibility and replacement cost coverage and even sometimes loss of use, which we've gone over in the first episode.

SPEAKER_02 7:21

Yes, so true. Um, but of course, like with anywhere, pricing and availability will vary with private flood insurance.

SPEAKER_01 7:27

Private flood insurance is typically more expensive too, and it has shorter wait times and it has those higher limits. It's just gonna cost a little bit more. Yeah, true. Okay, so speaking of costs, this is another cost that some homeowners might need to consider. How much does flood insurance actually cost?

SPEAKER_02 7:43

Yeah, so flood insurance costs on average about $800 to $1,500 a year. But that can really, really depend, like with home insurance, on the risk in your area, right? So your location, whether you're in a flood zone, how much risk there is in that flood zone, your elevation, even, and your home value, of course.

SPEAKER_01 8:02

Yeah. So let's go over some examples. So, for example, flood insurance in Florida is gonna be really high. There's such a high hurricane and storm surge risk all across the state. It's gonna be pretty high. Sure is. Texas is another good example. It really varies widely based on if you're a coastal or inland, but remember those awful floods that happened in inland Texas last year. Yeah. It's still important to consider, even if you don't live on the coast. And then finally, another high risk state is California. Obviously, you're associating that with wildfires, but California can still have a risk. It's lower than average, lower than say Texas or Florida. Right. Um, but it can be high in certain areas if you live in near lakes or if you live on the coast, of course. So important to consider when you're looking at flood insurance. Yes. So all of that is to say, most importantly, you don't need to live in a flood zone to have a flood.

SPEAKER_02 8:55

Definitely not. Um, in fact, a majority, a majority of claims come from homes outside of those special flood hazard areas. Exactly.

SPEAKER_01 9:04

But high-risk zones often require higher premiums and may be required by your mortgage lender. Yes. Okay, so we talk a lot about home insurance and flooding, but renter's insurance and flooding is also something you may want to consider.

SPEAKER_02 9:17

Yes, of course. Because even if as a renter you're not insuring the structure of the home or apartment where you live, you do want protection for your stuff, right? Your belongings, your furniture, and things like that. So it may be a good idea, especially if you're lucky enough to have a basement that you store things in that could be at risk for flood damage. Um, or you live in a basement unit where you and all of your belongings are, right? At more risk for flood. Um, but everyone is different. So just make sure that you have the coverage you need for the risk kind of in your area.

SPEAKER_01 9:50

Exactly. And we're gonna go over renter's insurance in an episode coming soon. Yes, we will. But um, renter's insurance doesn't cover the structure of the building. Right. So you want to have enough flood insurance to cover the contents, your per personal property. Exactly. Yeah. So, with all this talk about flood insurance, yeah. How do we even get a flood insurance quote?

SPEAKER_02 10:10

Oh man, let's do it. Let's do it. Um so you have a few options. A classic way that and you get um flood insurance through the NFIP is through it's called the Write Your Own program, very fancy, where basically you can buy federally backed flood insurance through your insurer. Most most insurers that you will you'll buy insurance through can write flood insurance policies through the NFIP. So even though it's like insured from the NFIP, you're kind of buying it from your a standard insurer. You know what I mean? Feels kind of weird, but it's above board, we promise. Um, you can also get it through um private flood insurance, like we've talked about. And you can talk to an agent, whether it's an agent at just a standard insurance company or at a flood insurance company and talk through what some of your options might be.

SPEAKER_01 10:59

So flood insurance, it's very important to note, has a waiting period. So the NFIP usually has a 30-day waiting period. So that's that federal one. Yep. And then the private can range from zero to 15 days. So if you're kind of like looking at a hurricane coming up and like you really need it, maybe check out a private insurer first and see what the waiting period is.

SPEAKER_02 11:19

Yes. Um, and that basically means, yeah, you can't buy it the day before a storm rolls in, um, which is why it's really good to check ahead, know your risk, always be prepared.

SPEAKER_01 11:30

Yes. Yeah. So as we've chatted about a little bit, flood insurance can be quite expensive. And as another expense in an already very expensive world, how can we actually save on flood insurance?

SPEAKER_02 11:42

Yeah, um, there are a few things you can do. So one way to save or at least get the most accurate price that you can, right? Yeah. Is to get an elevation certificate. So an elevation certificate involves an inspection by a licensed surveyor or engineer. And the certificate shows your home's elevation relative to your community's base levels. Yes. So it's a tool that ensures used to determine your home's risk, basically, um, of flood damage. So a home with higher elevation can qualify for discounts.

SPEAKER_01 12:14

For sure. So another element of this and an element in all of disaster preparation is mitigation.

SPEAKER_00 12:19

Yeah.

SPEAKER_01 12:20

So for flood mitigation, a couple options are filling your basement because that pretty much eliminates that problem. Yep. Um, or installing flood openings into your foundation.

SPEAKER_02 12:30

And there are many other options. So definitely look into that. Yeah. Um, and a few other things. One thing, you know, we've talked about this with home insurance is you can increase your deductible typically, which is increasing the amount that you pay out of pocket when you file a claim before your insurance kicks in. Like with home insurance, that will reduce your premiums. But as we just said, it increases your kind of immediate out-of-pocket costs. So you have to be sure that you're able to afford that increased deductible so that you can then get coverage for the damage. Um, and then of course, um, shop around, like we've talked about. Yeah, like just knowing, knowing what's out there, knowing the private versus federal policies, what are the cost differences? Because people, private insurers and the NFIP, they measure risk differently. So it's not even necessarily a given that the private will be always more expensive for your area. Who knows? Who knows? Right? So I think just because it's a niche insurance doesn't mean you can't compare quotes from the MFIP, private insurers, etc.

SPEAKER_01 13:32

For sure. Okay, let's get into some frequently asked questions.

SPEAKER_02 13:35

Yeah, let's do it.

SPEAKER_01 13:36

All right, Julia, are you ready to answer some flood insurance questions?

SPEAKER_02 13:40

I'm so ready. Let's do it. Okay. How much is flood insurance? Flood insurance, like I said, typically costs $800 to $1,500 a year, um, but it can be higher in higher risk areas. Yeah.

SPEAKER_01 13:53

Does flood insurance cover hurricanes?

SPEAKER_02 13:56

Ooh, a general question. Um flood insurance covers flooding that happened as a result of hurricanes. Um, it doesn't cover the other damage from hurricanes, famously wind, for example. Yes. Yeah, so you might need extra coverage or higher limits on your home insurance policy to cover that. Yes.

SPEAKER_01 14:17

So does flood zone X require flood insurance?

SPEAKER_02 14:21

Ooh, okay. So every flood zone has a letter associated with it, flood zone X is minimal to moderate flood hazard, which basically means that you have the option to purchase flood insurance, but it's not required.

SPEAKER_01 14:35

How much is flood insurance in Florida?

SPEAKER_02 14:38

Florida is the most expensive state for home insurance, um, largely because of hurricane risk. Yeah. More so because of wind damage, because obviously homeowners policies do not cover flood damage, but it also has flood insurance premiums on the higher end of things for that reason. So the average flood insurance premium in Florida is $1,363 a year.

unknown 15:02

Okay.

SPEAKER_01 15:02

So how do I know if I need flood insurance?

SPEAKER_02 15:06

Yeah, I mean, if you live in a high-risk zone, um, if you've previously had flood damage in your home or you know that the home has previously been damaged by floods, um you live near a coastline, of course, a river, a lake that might be prone to flooding, you have a basement, um, particularly a finished basement where you're keeping anything valuable, or a single-level home, um, or your area has had recent flood damage, those are all pretty strong indicators that you might want that coverage protection for yourself. And there's a tool called Flood Smart, um, which is I believe also run by FEMA that you can use to assess your risk as a homeowner.

SPEAKER_01 15:44

For sure. And we'll link that in the description for everyone if they want to check out if their home is in a flood risk area. Definitely. Okay, so let's get into our action plan. Let's talk about how we know if we need flood insurance and what we're gonna do. So, first, you're gonna want to check your flood risk using that map. Um, and you can use other FEMA flood maps to check what's going on in your area.

SPEAKER_02 16:04

Yes. Um, step two, using those resources, confirm whether or not you're in a floodplain or what level of floodplain you're in, right? And then confirm if your mortgage lender requires you to have flood insurance.

SPEAKER_01 16:16

For sure. And then you want to also consider like if it's not required, what's your risk level? What kind of emergency fund do you have for your home? Because just an inch of flood water can cause $25,000 in damage. It's a very serious event. Yes. So consider what your risk tolerance is here. Yes.

SPEAKER_02 16:36

And just as a small aside, rain happens. Rain happens. So even if you're not near a huge body of water or even a small body of water, if you live actually in an area that doesn't see a lot of rain, and then you happen to get a really heavy storm, that can cause catastrophic flooding. Yes. Even if it's not typically a high risk for that area. So that is why this is really worth considering, even when you're not living on an ocean cliff, you know? Anyways, back to action plan. Step four is of course to get a flood insurance quote. Yes. Um, we really recommend that you compare NFIT policies with private flood insurance policies to see what will suit your needs best and what will suit your budget best. For sure.

SPEAKER_01 17:18

All right, so overall, flood insurance is separate from your home insurance policy. It is never covered by standard home insurance.

SPEAKER_02 17:25

Yes. It covers rising water, not like a burst pipe.

SPEAKER_01 17:30

Yes. And your risk depends on your location, but like we just talked about, no one is risk-free.

SPEAKER_02 17:35

Exactly. And waiting until a storm hits means it will be too late. Yeah. And flooding is super expensive. So expensive. And being unprepared is is worse. Worse. It's really worse. Yeah.

SPEAKER_01 17:45

Thank you everyone for tuning in to this episode of No Dumb Questions. We hope we gave you some valuable information on flood insurance because it really is a very important type of insurance. You can compare home insurance quotes using the link below. And until next time, stay prepared and protect your wallet.

SPEAKER_00 18:01

You're listening to No Dumb Questions, an Insure Fi podcast. This content does not constitute personalized financial or legal advice. This podcast is written, produced, recorded, and developed by Sarah Getman, Julia Taliessin, Riley Hines, Sidney Harrell, and edited by Angelica Coleman. Compare insurance quotes by clicking the link below.