Flood Insurance Coverage
The NFIP defines a flood as “ a general or temporary condition of partial or complete inundation of 2 or more acres of normally dry land or 2 or more properties (at least one of which is your property) from overflow of inland waters, unusual or rapid accumulation or runoff of surface water from any source or mudflows". Any event that influences flooding, such as an earthquake or hurricane, qualifies for a claim.
Flood insurance coverage is provided for buildings and contents or only contents. A principal dwelling can be insured up to the maximum allowed or no less than 80% of its replacement value at time of loss, to qualify for a claim. A principal dwelling can have coverage up to $250,000 and personal property (contents) up to $100,000. All other buildings and contents are insured for Actual Cash Value, which is the replacement cost at the time of loss less physical depreciation. Some insurance companies offer additional coverage for contents. Deductibles are available separately for buildings and contents. Some mortgage providers place a limit on deductibles.
Flood insurance rates are set and are the same irrespective of which insurance company or agent provides your coverage. The rate depends on your risk profile which takes in to account the location of your property, its age and type of construction. FEMA updates flood hazard maps across the country. The classification for your area can change from high to moderate risk or vice versa with such updating. Premiums can increase or decrease accordingly. Inquire from your insurance provider about taking out a Preferred Rate policy to guard against premium increases.
The Flood Insurance Rate Maps drawn by FEMA can classify your area as high risk (Special Flood Hazard Area), moderate-to-low risk or undetermined-risk. According to the NFIP, a high risk area has a 26% chance of experiencing a flood during the life of a 30 year mortgage. Hence the federal government’s requirement of flood insurance for mortgaged properties in high risk areas. Even if your area is moderate-to-low risk, NFIP recommends flood insurance as 25% of all flood claims has originated from this category.