Do I Need Flood Insurance on my Home?
Today's update is on the topic of flood insurance. Insurance is (obviously), very important for every homeowner. For many of us, insurance is something that we try to get a competitive price for, but don't really understand what we're buying until we have an issue, and then need to get it fixed. Personally, despite a lot of "fine print" reading, I'm usually unclear on various points when it comes to what's covered, how much its covered, and in what situations I'm not covered. Because of the specialty nature of this post, I thought I'd go right to the source, my insurance agent, Morgan Duffy, Owner of Hayden Wood Insurance Agency. Inc in Southborough.
Matt: Welcome to the blog Morgan! Let's get right to the point. What is Flood Insurance?
Chances are, you don't have Flood
Insurance. But you should find out
if you need it.
Morgan Duffy: Flood Insurance provides coverage for ground water. While a flood is normally defined as an overflowing of a large amount of water beyond its normal confines it may also be cause by the rapid accumulation of rain.
Matt: What does Flood Insurance typically cover?
Morgan Duffy: Flood Insurance provides coverage for both the building and contents (Matt's note: contents = Your stuff!) located at or above ground level. It will also provide limited coverage for essential mechanicals (furnace, a/c, etc…) which may be located in a structure below ground level (aka your basement). It is important to note that a finished basement is not covered.
Matt: What does a typical home insurance policy cover?
Morgan Duffy: This can be a bit of an involved question but if we are limiting it to our current topic of Flood Insurance then the answer is easy – nothing. Homeowners insurance specifically excludes flood though many companies offer endorsement for the backup of sewers & drains and sump pump failure. These endorsements (Matt's note: endorsement is insurance speak for additional coverage at additional cost often only if you ask for it!) usually provide very limited coverage of between $2,500-$10,000 against these specific situations.
Matt: So, it's really difficult to get insurance protection for my finished basement?
Morgan Duffy: Yes, in most cases coverage is not available for finished basements, however, there is an exception - if your home has over a $1MM Replacement Cost (Insurable Value) then you may qualify for a high end company who caters to affluent individuals. In that case flood coverage is actually an endorsement included in the home insurance policy. That type of homeowner policy is in a whole different league and that flood endorsement does offer coverage for your finished basement treating it like it treats the rest of your home.
Matt: How expensive is flood insurance?
Morgan Duffy: That depends on the flood zone you are in. If you are in what is classified to be a 50 or 100 year zone, meaning that it is expected to flood every 50-100 years flood insurance can be expensive when compared to your home insurance premium. But if you are not in one of those zones then flood insurance is a relatively inexpensive proposition and worth the cost. It is important to note that flood insurance is available up to $250k in coverage. If you want or need more coverage than that on your home then you will also need to purchase an Excess Flood Policy at an additional cost.
Matt: How do I know if I'm in a Flood Zone?
Morgan Duffy: The National Flood Program supports a website http://www.floodsmart.gov where you can type in your address and it will tell you what type of flood zone you are in along with what your risk of flood is.
Matt: Morgan, what are the different levels of risk that http://www.floodsmart.gov would give me and how does that correspond to pricing of flood insurance?
Morgan: Low Risk = low cost
Moderate Risk = moderate cost
High Risk = high cost
Matt: As a homeowner, can I change whether I'm in a Flood Zone?
Morgan Duffy: Nope. This is determined by the government. If your home is in a flood zone there are factors which may reduce the risk of flooding thusly reducing the premium for your flood coverage. This has to do with the relative elevation of the home vs the Base Flood Elevation for that location. If you are in this situation you may obtain an Elevation Survey and submit that to the insurance company providing your flood coverage for consideration.
Thanks to Morgan Duffy from Hayden Wood Insurance Agency, Inc.