P!NPoints: Understanding flood insurance

Massive flood events, from Pakistan to Australia to Japan, demonstrate the versatility of rising waters’ sources, as well as the unparalleled strength of these disasters. In the United States, the toll of recent notable floods bring the impact home – last spring’s rapidly rising rivers in Tennessee’s flood and California’s winter storm runoff that led to entire towns struggling under the weight of mudslides.
Flooding can occur in every U.S. state, but floods are not covered under standard homeowners insurance, according to floodsmart.gov. The National Flood Insurance Program (NFIP), which runs the website, is a federal program that provides a means for property owners to financially protect themselves. The NFIP offers flood insurance to homeowners, renters and business owners if their community participates in the program. Participating communities agree to adopt and enforce ordinances that meet or exceed FEMA requirements to reduce the risk of flooding.
Flood insurance policies cover physical damage to your property and possessions. The following are covered under many flood insurance policies:

Building Property

  • The insured building and its foundation
  • Electrical and plumbing systems
  • Central air conditioning equipment, furnaces and water heaters
  • Refrigerators, cooking stoves and built-in appliances such as dishwashers
  • Permanently installed carpeting over unfinished flooring
  • Permanently installed paneling, wallboard, bookcases and cabinets
  • Window blinds
  • Detached garages (up to a certain percentage of Building Property coverage); detached buildings (other than garages) require a separate Building Property policy
  • Debris removal

Personal Contents Property

  • Personal belongings, such as clothing, furniture and electronic equipment
  • Curtains
  • Portable and window air conditioners
  • Portable microwave ovens and portable dishwashers
  • Carpets that are not included in building coverage
  • Clothing washers and dryers
  • Food freezers and the food in them
  • Certain valuable items such as original artwork and furs (up to $2,500)

What’s Not Covered:

  • Damage caused by moisture, mildew or mold that could have been avoided by the property owner
  • Currency, precious metals and valuable papers such as stock certificates
  • Property and belongings outside of an insured building such as trees, plants, wells, septic systems, walks, decks, patios, fences, seawalls, hot tubs and swimming pools
  • Living expenses such as temporary housing
  • Financial losses caused by business interruption or loss of use of insured property
  • Most self-propelled vehicles such as cars, including their parts

In contrast, according to the Federal Emergency Management Agency, the most common form of federal disaster assistance is a loan, which must be paid back with interest. The average federal Individuals and Households Program (IHP) award is around $4,000. To qualify for federal Home Repair Assistance, your home must have relatively minor damage that can be repaired quickly.

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According to the NFIP, an average home in a low-to-moderate risk area without a basement can take out a Buildings/Contents policy of up to $100,000/$40,000 for a $274 monthly premium. To find out more about flood insurance, visit www.floodsmart.gov.

On the coast, advocates say mitigation is key
According to Americans for Smart Natural Catastrophe Policy, whose website www.smartersafer.org details their advocation of smarter building policies, oppose the expansion of the NFIP that would encourage building practices in what are deemed hurricane-prone, environmentally sensitive areas. The coalition “believes that the Federal government has a role in encouraging and helping homeowners to undertake mitigation efforts to safeguard their homes against hurricanes … [and] opposes proposals being considered in Congress that would create moral hazards by providing direct or indirect subsidies for coastal homeowners’ insurance policies, thereby giving people incentives to build homes in hurricane-prone, environmentally sensitive areas,” according to its website.

The group supports measures that would encourage and assist homeowners in taking mitigation steps to protect coastal homes against hurricanes. This includes bills to create a new hurricane mitigation tax credit, as well as a new loan program that would provide low-interest loans to homeowners undertaking risk mitigation.
Members of the group organized a letter to Senate members in 2008 opposing any measures that would add to the tax burden created by the NFIP. The list of supporters of this successful opposition includes the Consumer Federation of America, Defenders of Wildlife, Environmental Defense, Friends of the Earth, National Wildlife Federation, Republicans for Environmental Protection, Association of State Floodplain Managers, Americans for Prosperity, Council for Citizens Against Government Waste, Competitive Enterprise Institute, FreedomWorks, Taxpayers for Common Sense, Association of Bermuda Insurers and Reinsurers, Reinsurance Association of America and the National Association of Professional Insurance Agents.

(Photo courtesy of the Federal Emergency Management Agency.)