Last Updated on 11/30/2022 by Mark Verhoeven
What is Flood Insurance?
Flood insurance is a sort of property insurance that protects a home from losses caused by floods, such as severe or prolonged rain, melting snow, coastal storm surges, clogged storm drainage systems, or levee dam collapse. A flood is considered a catastrophic occurrence in many places, and the damage or devastation it produces is not covered unless you have extra insurance.
Flood insurance explained
The National Flood Insurance Program was established by the United States Congress in 1968 with the passage of the National Flood Insurance Act of 1968. The National Flood Insurance Program (NFIP) has two goals: to spread the risk of flood losses by providing flood insurance and to decrease flood damages by limiting floodplain development. The programme allows property owners in participating communities to purchase government-administered insurance protection against flooding losses, and it requires flood insurance for all loans or lines of credit secured by existing buildings, manufactured homes, or buildings under construction in a community that participates in the NFIP’s Special Flood Hazard Area. The National Flood Insurance Program is only available to towns that implement suitable land use and control measures with strong enforcement mechanisms to mitigate flood damages by restricting development in flood-prone areas.
Flood insurance process
A flood insurance policy is distinct from the standard hazard insurance coverage included in a homeowners insurance policy since it is a sort of catastrophe insurance. Interior water damage caused by a burst pipe, for example, or weather disasters such as tornadoes and rainstorms is covered by standard homes insurance. It does not, however, cover the destruction or damage caused by floodwaters. Property owners who live in a region prone to this type of natural calamity will almost always require additional insurance.
Flood insurance operates in the same way as other types of insurance: The insured (home- or property owner) pays an annual premium based on the flood risk of the property and the deductible they select. If the property or its contents are damaged or destroyed by flooding caused by an external event (rain, snow, storms, collapsed or failed infrastructure), the homeowner receives cash for the amount of money required to repair the damage and/or rebuild the structure, up to the policy limit. Unlike ordinary homeowners insurance, flood insurance requires policyholders to get separate policies to cover their home and its belongings. If the sewage backlog was not caused by the rising floodwaters, a separate coverage rider is required.
National flood insurance program
The Federal Emergency Management Agency (FEMA) manages the National Flood Insurance Program (NFIP), which provides flood insurance to homeowners in participating towns as well as those who are determined to live in NFIP-designated floodplains. Private insurance companies, not the NFIP or FEMA, issue the real insurance policies.
High-risk properties are those that are located in zones marked with an A. They’re further broken down, with descriptions of anticipated floodwater heights and predicted occurrence rates over a 30-year mortgage. The properties assigned a V designation are similar to those in zone A. These are coastal areas with a high danger of flooding.
Checking a property address against the flood map service center on the Floodsmart.gov website will reveal the flood zone designation.
Location: Greenville, South Carolina
Education: MBA University of South Carolina
Expertise: Mortgage Financing
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