Chances are if you have homeowners insurance, you probably think you’re covered in case of any and all natural disasters. Many homeowners are shocked to discover, however, that most policies do not cover flooding, earthquake, war, and many other disasters.
Are Hurricanes Covered by Homeowners’ Insurance?
Hurricanes typically are covered by most homeowners insurance policies, but can have more limited coverage in the form of an endorsement or named exclusions. Additionally, the deductible is usually far greater than the “all perils” deductible, which applies in the event of any other type of covered loss. You should also carefully read what is actually covered when a hurricane is identified as the cause of loss. While most insurance policies cover damage from wind, hail, and lightning strikes, the vast majority do not cover flooding damage from hurricanes or other storms.
Why is Flooding Not Covered by Homeowners’ Insurance?
It is clear why insurance companies exclude coverage for flooding damage, but it is also obvious that this exclusion provides a major disservice to the homeowner. Flooding is a major problem in coastal areas. In fact, it is the most costly natural disaster every year by a wide margin. In the past, Insurance companies actually routinely covered flood damage until Hurricane Andrew. When this Category 5 hurricane slammed into Florida in 1992, it caused destruction that totaled $27.3 billion in property damage. Eleven insurance companies in Southern Florida alone went bankrupt. After that, coverage for damage caused by flooding became a rarity in most homeowners policies.
All homeowners should seek additional flood coverage, but it is especially important that those who live in coastal or hurricane-affected areas do so. In some high-risk areas, flood insurance is even required by law. However, you must make sure to have your flood policy in place well before hurricane season, as most flooding insurance policies take 30 days to go into effect and cannot be initiated once a storm has developed . Even those who live outside high-risk flood zones should consider adding flood insurance to their policy as a precaution. FEMA estimates that about 20 percent of all claims for flood damage take place outside high-risk flood zones. Weather and water are unpredictable and it’s best to be insured.
Will Federal Disaster Relief Cover My Flooding?
Some homeowners convince themselves that federal disaster relief will take care of them in the event of a hurricane. Be aware, however, that the payout for disaster relief is usually only a fraction of what you would receive from a flood insurance claim under an appropriate policy. Even then, disaster relief only kicks in when the destruction is widespread. If only your neighborhood or your street floods, there may not be any federal aid available.
What is the National Flood Insurance Program?
Surprisingly, the largest provider of flood insurance is the federal government. Decades ago, the government created the National Flood Insurance Program. This program fills the gap in the market since very few insurance companies offer flood insurance. The program covers up to $250,000 in home repairs and $100,000 for personal possessions. Usually, this type of insurance is purchased through intermediary, third-party companies that act as the face of the program by selling and managing the actual policies, and the price is usually quite affordable, depending on your area.
Do I Need Flood Insurance in Florida?
Florida has more flood insurance policies per capita than any other state, but that number is still far from what is needed. Last year, Floridians had 1.7 million policies in place, which is less than 20% of all houses in Florida and lower than the 23% that were covered five years earlier. If you live in Florida or another flood-prone state, you should obtain a flood policy in addition to your regular homeowners policy immediately. If you wait too long, it will be far too late when the storm is already on its way.