The National Flood Insurance Program is a government program run by the Federal Emergency Management Agency (FEMA). If your home or business is located within a 100-year flood zone as determined by FEMA, you will be required to purchase flood insurance to obtain a mortgage or business loan. Flood insurance must be purchased as a separate policy because flood damage is excluded from the standard insurance policies.
You can purchase a policy for just the building, just the contents or for both building and contents. If you do not have a loan or mortgage you do not have to purchase flood insurance. However, many companies today will not sell home or business insurance to someone who is in a flood zone but chooses not to purchase flood insurance.
If your home or business is not in a flood zone you can still purchase flood insurance via a “preferred policy” which is substantially less costly and includes coverage for both the building and contents. There is a 30-day waiting period for a flood insurance policy to become effective unless it is purchased at the same time as the property. If you receive emergency money (such as a loan) from FEMA after a flooding disaster, you will usually be required to purchase a policy as part of the terms of receiving assistance.
The flood insurance policy does not provide coverage to temporarily relocate your business or home, nor does it pay for lost income or lost rents. Flood insurance is to rebuild the structure or replace the contents. However, there are building and content deductibles and there is usually a limitation on personal property located in a basement so it is very important to discuss your situation and needs with your local insurance agent.
What exactly is a flood?
According to the FEMA website, it is:
A general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties (at least one of which is the policyholder's property) from one of the following:
- Overflow of inland or tidal waters
- Unusual and rapid accumulation or runoff of surface waters from any source
- Collapse or subsidence of land along the shore of a lake or similar body of water as a result of erosion or undermining caused by waves or currents of water exceeding anticipated cyclical levels that result in a flood as defined above
What does flood insurance cover in my basement?
Flood insurance covers your home's foundation elements and equipment that is necessary to support the structure, such as your furnace, water heaters, and circuit breakers. These particular items would be insured under building coverage, while others -- such as a washer, dryer or freezer -- would be covered only if contents coverage was in place. The National Flood Insurance Program encourages people to purchase both building and contents coverage. Flood insurance does not cover basement improvements, such as finished walls, floors, ceilings or personal belongings that may be kept in a basement. For a complete list of what is covered, view the Standard Flood Insurance Policy (SFIP) Forms.
The FEMA website, www.fema.gov, also contains maps and more in-depth information and details about your area of interest. Of course, you should always consult with your own agent as well.