Flood Insurance vs. Standard Home Insurance: What’s the Difference?

Navigating the world of insurance can be confusing, especially when it comes to protecting your home. Many homeowners mistakenly believe their standard policy covers all types of damage, but that’s not the case. Understanding the crucial differences between homeowners insurance and flood insurance is essential for adequate protection. This article will break down the key distinctions between these two types of coverage, helping you make informed decisions to safeguard your most valuable asset.

Understanding Standard Homeowners Insurance

Standard homeowners insurance is designed to protect your property and belongings from a variety of perils. These policies typically cover damages caused by:

• Fire: Damage from house fires is usually covered by a standard policy.
• Wind Damage: Including wind damage from hurricanes, and rain that enters through wind-damaged windows or roofs.
• Tree Damage: If a tree falls on your house, homeowners insurance usually pays for repairs.
• Lightning Strikes: Damage from lightning is a covered peril.
• Theft: Losses due to theft and vandalism are typically included.
• Water Damage (Internal Sources): Such as burst pipes, overflowing toilets, or rain entering through a suddenly damaged roof.

However, it’s important to note that homeowners insurance does not cover all types of water damage. Specifically, it excludes flood damage. If, for instance, a pipe bursts due to age or deterioration, the policy might cover the damage to your home’s contents, but not the cost of repairing the pipe itself. Additionally, if you are negligent and do not fix a known leak, the insurance company may not pay for resulting damages.

The Necessity of Flood Insurance

Flood insurance is a separate type of policy specifically designed to cover damage caused by floods. Floods occur when normally dry land is inundated by water or mudflow. This can be the result of:

• Storm surge
• Overflowing bodies of water
• Heavy rainfall
• Groundwater seepage
• Mudflows

It’s crucial to realize that every region of the United States experiences floods, and that 90% of all natural disasters in the country involve flooding. Even areas considered low risk are susceptible, with up to 25% of all flood claims coming from these areas.

What Flood Insurance Covers

Flood insurance policies, whether through the National Flood Insurance Program (NFIP) or private carriers, typically cover damage to your home’s:

• Structure: Including the foundation, electrical and plumbing systems, furnaces, water heaters, and built-in appliances.
• Personal Property: Such as clothing, furniture, and electronics, though coverage may vary depending on the policy.
• Detached Garages: Flood insurance can cover detached garages.

It’s important to note that coverage is typically up to policy limits. The NFIP offers a maximum of $250,000 for dwelling coverage and $100,000 for personal property. Some private insurers may offer higher limits.

Key Differences Summarized

To clearly distinguish between the two, here’s a breakdown:

Why Inland Clients Might Need Flood Insurance?

It’s not just homeowners in coastal areas that should be concerned about flooding. Even if you do not live near a body of water, the following factors can increase your risk of flooding:

• Urbanization: Concrete and asphalt prevent natural water absorption.
• Overwhelmed Drainage Systems: Storm drains can become overloaded during heavy rains.
• Flash Floods: Heavy rains can cause flash floods anywhere.
• Climate Change: More frequent and intense weather events are creating new flood zones.
• Construction: Nearby construction can alter historical water flow patterns.

Examples to Clarify Coverage

Here are some examples to better understand what each policy covers:

• Scenario 1: Hurricane Damage
  • Homeowners Insurance: May cover wind damage that rips shingles off the roof, rain entering through the damaged roof and trees falling on the house.
  • Flood Insurance: Specifically covers storm surge that floods the ground floor and mold that develops from floodwaters.
• Scenario 2: Heavy Rainfall
  • Homeowners Insurance: Might cover a leaky roof caused by overflowing gutters and a failed sump pump if there is an add-on.
  • Flood Insurance: Covers damage from saturated ground, water seeping into the basement, and an overflowing creek.

What Flood Insurance Doesn’t Cover?

While essential, flood insurance has limitations. Standard policies typically exclude coverage for:

• Temporary Housing: Additional living expenses while your home is repaired.
• Outdoor Property: Such as decks, patios, landscaping, and pools.
• Personal Property in Basements: Especially if stored in a basement or crawl space.
• Currency and Valuables: Such as precious metals, and paper valuables.
• Vehicles: Cars and other self-propelled vehicles.
• Preventable Issues: Moisture and mold/mildew damage that the homeowner could have prevented
• Earthquakes Earth movements caused by floods

Is Flood Insurance Required?

If you live in a high-risk flood zone (Special Flood Hazard Areas) and have a mortgage through a federally backed lender, flood insurance is typically required. Lenders may require flood insurance if your home is near a body of water. Even if you aren’t required to have flood insurance, it is often a wise choice considering the potential cost of flood damage.

When to Purchase Flood Insurance?

The best time to purchase flood insurance is before you need it. Flood insurance does not retroactively cover damages. Keep in mind that NFIP policies have a 30-day waiting period before coverage takes effect, while some private policies may have shorter waiting periods.

How to Get Flood Insurance?

• Kin Insurance: Homeowners in Florida and Louisiana can get flood coverage through Kin Insurance, either as an endorsement to your existing home insurance, or as a standalone policy.
• The National Flood Insurance Program (NFIP): Administered by FEMA, with policies sold through various insurance companies.
• Private Insurers: Private companies often offer more comprehensive coverage and higher limits than the NFIP.
• Independent Agents: Can help you shop around and find the best coverage for your needs.

Key Takeaways and Best Practices

• Review Your Coverage Annually: Especially before seasons with a high risk of flooding.
• Understand Your Flood Risk: Check flood maps and other resources to determine your potential risk.
• Don’t Wait: Purchase flood insurance well in advance of potential disasters.
• Document Discussions: Keep records of your insurance conversations and recommendations.
• Be Aware of Exclusions: It’s very important to know what is not covered by a flood insurance policy, such as temporary housing, outdoor property, basements and vehicles.
• Consider Private Options: Explore private flood insurance for potentially broader coverage and higher limits.

Conclusion

While homeowners insurance provides essential coverage for many perils, it’s not designed to protect against flood damage. Flood insurance is a necessary addition for homeowners who are at risk of flooding, providing critical protection for your home’s structure and personal property. By understanding the difference, you can make informed decisions to protect your home and financial well-being. With the increasing frequency of severe weather events, investing in the right coverage is more important than ever. Make sure you are prepared and avoid learning the hard way that your homeowners insurance will not cover flood damage.