Flood damage has become a major topic for homeowners. Hurricane damage in Texas, Florida and Puerto Rico is a multi-billion dollar problem for society in general, and flooding can be catastrophic for a family that loses its home and possessions to rising waters. What do you need to know about flood damage and about insurance availability?
Some Basic Information. Here are four key facts about flood insurance that all homeowners should know.
1) “Flooding is the nation’s number one natural disaster.” This is according to the California Department of Insurance. And although all of the recent flood news is from the Gulf States and the Caribbean, California is a major site for flooding. Of the 81 Major Disaster Declarations issued by the State of California since 1954, 45 involved flooding, and California has experienced 3,138 “flood events” since 1996.
2) Many homeowners assume that flooding is an all-or-nothing loss; that if it happens to you, your home will be rendered uninhabitable. But in fact the average insurance claim related to flood loss is $39,000. Your insurance planning needs to take partial loss into account.
3) Flood risk in California is not limited to coastal areas. Flooding can occur almost anywhere, and in fact, the Central Valley is the most at-risk area in California.
4) Most homeowner and renter policies do not cover flood damage. This was not the case until the 1950s and 1960s when a vastly increasing number of flood-related claims forced most insurers to exclude flood losses from their homeowner policies. Standard homeowner and renter policies include coverage for water damage due to such events as burst pipes and drains, but not from external inundations.
What options are there for buying Flood Insurance?
The National Flood Insurance Program is a critical component in protecting homeowners in California and nationwide. But NFIP insurance comes with some very significant limitations that make it inappropriate for many homeowners. First, and most importantly, NFIP insurance has policy limitations, which are prohibitively low for many if not most California homes. A standard NFIP policy will cover property damage only up to the limit of $250,000, and personal property losses up to $100,000. Deductibles generally range from $1,000 to $10,000. Second, NFIP policies are only available for properties located in communities, which have agreed to create and maintain certain flood control management policies consistent with Congressional mandates. While many communities in California have adopted such policies, not all have done so. The bottom line is that if your home is worth more than the $250,000 NFIP property limit, standard NFIP policies will not satisfy your needs in the event of a total loss.
The good news is that there are insurance programs that will write policies with higher limits and on properties, whether inside or outside of NFIP participating communities. Policies are available with property limits as high as $5,000,000 with coverage for up to $1,000,000 of personal property, and deductibles as low as $500. Policies can cover loss of use expenses, which are not covered under NFIP policies. In addition, while NFIP policies require a 30 day delay before becoming effective, many privately issued policies do not.
Losses due to flood are a significant risk factor for homeowners and standard homeowners policies do not cover such losses. NFIP policies are a valuable instrument in protecting against potential flood damage. But NFIP will not be right for everyone — particularly homeowners with properties valued above $250,000. If you are in this category - and many California homeowners are — then you should consider additional coverage. Pfeifer Insurance Brokers can help you find flood insurance that works for you, and our services are free to you.
Alex Pfeifer
PFEIFER INSURANCE BROKERS
650 762-7080
alex@pfeiferins.com