Flood Insurance for No-Flood Zone areas

brij2006

@short+sassy Your agent is right, Lloyd's of London is a very large insurance company that offers a ton of perks.  They usually write in higher risk areas so it would make sense that they write in NOLA.  Then to have a higher than usual coverage on that is good as well.

MommyLiberty5013

Today I called my homeowners insurance company. I learned quite a bit. First of all, no homeowners companies actually write flood policies...all flood policies are handled by a separate institution at the federal level. The federal government pays for flood insurance (also learned that only 8 nations, including the USA, provide flood insurance at the federal level)...so when I call the company and say I want a quote for flood insurance, I actually got patched through to another entity entirely not even with my insurance company.

Next, a valid flood claim is only considered valid IF 2 things apply...the water comes OVER the surface of the land and into the home. AND, at least two other homes in the area flood or at least two acres in the area flood including the area on which the home rests. So, if your home is the only one to have water come in...NOT a flood. Therefore, NOT covered.

A flood policy is paid once per year, in full - not in installments. Also, there is a 30 day waiting period for coverage to go into effect. This federal government flood policy does not cover any loss to contents. It only covers loss for debris removal, mold spraying, and to return the home to basic functional level for safety. Meaning that they will repair the home, but only to a basic level of functionality. They will replace furnaces, water heaters, sump pumps, water softeners, and other lower level mechanicals but no personal items like electronics, furniture, etc.. Also, they will not replace bathrooms or any high-end finishes. So basically if your basement is finished and it floods (per their definition), they will put up basic electric and basic drywall and that's it...they return it to "an unfinished state."

My home owner's policy only covers water that begins from within the home...leaking appliance, burst pipe, etc.. If a septic backup occurs from within the home, that's covered. However, if the backup occurs in the line between the home and the tank or in the tank those are both NOT covered. And, my company offers no septic back-up rider. FROWN.

For many homeowners, including me, this means there is a gap in coverage. I am not in a high-risk flood area, however, I know my water table here is higher. If the water comes into the home from the basement floor and/or walls, this is NOT flood (not surface water). However, my homeowners company said they would have to treat that sort of occurrence on a case-by-case basis for structural and contents replacement. In other words, I could be SOL if my basement leaks water and the homeowners company decides not to cover it. Basically, they can decide what they want to do and I have no say in the matter.

And, I could be SOL if my septic backs up into the home or yard from a blockage occurring in the line or tank.

I did start a flood insurance quote, and for the highest end of coverage DH and I would have to pay $499 per year, which covers up to $200k. I really doubt we'd have a true flooding issue where we're located. However, I am worried about the water table rising and coming into the home.

I guess the one thing I need to do is be sure our sump pump is operating at its optimal level...and we properly maintain our septic system. This kind of sucks.

 

short+sassy

MommyLiberty5013 said:

Today I called my homeowners insurance company. I learned quite a bit. First of all, no homeowners companies actually write flood policies...all flood policies are handled by a separate institution at the federal level. The federal government pays for flood insurance (also learned that only 8 nations, including the USA, provide flood insurance at the federal level)...so when I call the company and say I want a quote for flood insurance, I actually got patched through to another entity entirely not even with my insurance company.

Next, a valid flood claim is only considered valid IF 2 things apply...the water comes OVER the surface of the land and into the home. AND, at least two other homes in the area flood or at least two acres in the area flood including the area on which the home rests. So, if your home is the only one to have water come in...NOT a flood. Therefore, NOT covered.

A flood policy is paid once per year, in full - not in installments. Also, there is a 30 day waiting period for coverage to go into effect. This federal government flood policy does not cover any loss to contents. It only covers loss for debris removal, mold spraying, and to return the home to basic functional level for safety. Meaning that they will repair the home, but only to a basic level of functionality. They will replace furnaces, water heaters, sump pumps, water softeners, and other lower level mechanicals but no personal items like electronics, furniture, etc.. Also, they will not replace bathrooms or any high-end finishes. So basically if your basement is finished and it floods (per their definition), they will put up basic electric and basic drywall and that's it...they return it to "an unfinished state."

My home owner's policy only covers water that begins from within the home...leaking appliance, burst pipe, etc.. If a septic backup occurs from within the home, that's covered. However, if the backup occurs in the line between the home and the tank or in the tank those are both NOT covered. And, my company offers no septic back-up rider. FROWN.

For many homeowners, including me, this means there is a gap in coverage. I am not in a high-risk flood area, however, I know my water table here is higher. If the water comes into the home from the basement floor and/or walls, this is NOT flood (not surface water). However, my homeowners company said they would have to treat that sort of occurrence on a case-by-case basis for structural and contents replacement. In other words, I could be SOL if my basement leaks water and the homeowners company decides not to cover it. Basically, they can decide what they want to do and I have no say in the matter.

And, I could be SOL if my septic backs up into the home or yard from a blockage occurring in the line or tank.

I did start a flood insurance quote, and for the highest end of coverage DH and I would have to pay $499 per year, which covers up to $200k. I really doubt we'd have a true flooding issue where we're located. However, I am worried about the water table rising and coming into the home.

I guess the one thing I need to do is be sure our sump pump is operating at its optimal level...and we properly maintain our septic system. This kind of sucks.

 

While the first bolded is normally true, there are other companies that will write flood policies.  Though it has been my experience they are substantially more expensive than the NFIP.  The government program is the NFIP (National Flood Insurance Program).  But yes, most typical homeowners insurance companies don't write flood insurance policies.

With that said, I've always bought my flood policies through one of my property insurance agent(s), though the carrier is NFIP.  With flood insurance being much more prevalent in my area, all agents are set up to buy those NFIP policies for their customers, though I could see that may not be the case in other areas.

To the second bolded about the 30 day waiting period, that clause was put into place a number of years ago to guard against people not carrying flood insurance.  But then calling up their insurance agent to add it on or increase it if a hurricane was headed their way.  So, while I don't understand why they get to CHARGE for that 1st month of insurance they don't cover, I do understand why the policy is in place.

However, there is an exception on the 30-day waiting period for people who are putting flood insurance on a home they are purchasing.  Then their flood insurance takes effect on the day of closing.  Even if the insurance was just ordered the day before.

To the third bolded, yikes!, I'm not sure why you were told that contents coverage can't be included on a flood policy.  Maybe it's different for different areas, but the flood insurance for my personal home most certainly has contents coverage.  I believe $50K worth (replacement coverage).  If there is a State Farm in your area, maybe speak to one of those agents.  State Farm is my agent for the flood insurance on my personal home.  Because, yes!, contents insurance is important.  Even a few inches of water will destroy all furniture and appliances on the first floor.  That can be very spendy to replace for an entire house.

As a last resort, you can buy just "contents" insurance.  I could be wrong on this, it's been awhile since I looked into it, but I think that type of insurance covers contents regardless of what happens, ie fire, flood, theft etc.  You also might be able to buy "renter's insurance", even though you are a homeowner.  I know renter's insurance covers contents for everything...flood, fire, theft, even for a car break-in.  Either of those options will be a few hundred dollars a year.

I didn't own a home at the time of Katrina, but I did have renter's insurance.  The house I lived in didn't flood, but the shed in the backyard did.  I was paid out for my temporary lodging with a stipend for food (capped at two weeks) and for the contents I had in both my shed and the refrigerator.

It is rare someone can teach me something about flood insurance I don't already know.  I wish that weren't the case, lol.  But I did not know about the stipulation that either two other houses had to have flooded or two acres for it to be considered a flood.  Thanks for that, @MommyLiberty5013. 

short+sassy

Oh!  I also wanted to add that, while it is true flood insurance has to be paid for in full each year, it can usually be escrowed with a person's mortgage just like taxes/property insurance.

In fact, where I live, an escrow is almost always how it is done.  But then, most of the homes are in a flood zone and mortgagers require the insurance to be in place at closing anyway...just like for property insurance.

brij2006

I'm going to 2nd @short+sassy.  I'm an insurance agent and we do offer flood insurance through multiple companies.  However, it is backed by NFIP.  The insurance companies actually are just servicing agents.  The reason why some insurance companies also offer it is because NFIP does only cover the dwelling itself and the insurance company can offer coverage on the contents. 
@MommyLiberty5013 I would also double check about the backup of your septic.  I know that all of our companies do offer coverage if the septic were to back up because of something mechanical in the septic tank or the line.  However, it only covers the damage the backup does, not to repair the line or septic tank. We're in the heart of farm country in Illinois so 90% of houses have septic tanks here.  We've had a couple of claims due to them backing up but it's very rarely and unlikely to happen due to how they are set up.