Nearly every home faces the potential risk of a flood, even if it isn’t located in a defined flood zone. Heavy rain, substantial water generated from melting snow, and other causes can all lead to significant issues with flooding, which makes recognizing and addressing this issue crucial.
Despite that widespread risk, common policies that protect your home and its contents — like home insurance and umbrella policies — generally don’t offer flood protection. Dedicated insurance coverage is needed to address the potential for damage and loss related to a sudden overflow of water.
Let’s take a closer look at flood insurance, including what it covers, how it’s used, who should consider purchasing it, and similarly important considerations.
Flooding represents a unique risk to insurers, which leads to the dedicated policies generally used to protect homeowners, renters, and business owners. Traditionally, the process through which flooding occurred meant people who owned homes at the highest level of risk were most likely to purchase flood insurance, which limited the feasibility of insurance carriers providing such policies.
Many insurers still don’t offer this coverage, although there are options available on the market that you can use to protect your home. These fall into two categories:
The NFIP is a federal government program, managed and administered by the Federal Emergency Management Agency (FEMA). In basic terms, communities agree to follow certain flood management strategies and processes. In return, those living in the community can purchase federal flood insurance through the program.
These policies are standardized in many ways, offering a dependable baseline of coverage but lacking the ability to offer more personalized support for individual needs. Similarly, pricing varies based on a variety of risk factors, as FEMA explains, but is otherwise set through the NFIP. The process of qualifying for such a flood insurance policy is also highly detailed. This type of coverage is only available in communities that adhere to NFIP rules, although any homeowner in such an area can — or may be required to — purchase this coverage. NFIP policies can be an effective and reliable component of a larger strategy to protect your home and other valuable assets. However, it’s also worth considering the additional options available through private flood insurance.
Private flood insurance
Private flood insurance is similar to the many other products that an insurance carrier may offer. These policies must adhere to the same general standards and regulations as all other types of insurance but are not subject to unique rules or restrictions in the same way as NFIP flood insurance policies.
Private flood insurance is a valuable option for those who live in communities that don’t follow the NFIP flood mitigation rules or do not live in an area that is considered at risk by the NFIP. While flood insurance is extremely important for the homes most at risk of an adverse incident, the potential damage that one can cause is worth considering for many homeowners.
Even the moderate possibility of flooding should be a priority when building an effective and comprehensive strategy. The National Association of Insurance Commissioners points out that more than 20% of claims made to the NFIP originate from areas outside of mapped and recognized flood zones.
Changing weather patterns and a variety of other factors have made flooding a much broader issue than it was in the past. Unfortunately, you no longer need to live in a coastal area or in a recognized high-risk flood zone for your home to be at risk for flood damage.
FEMA says just one inch of floodwater can cause up to $25,000 in damage. That includes physical damage caused to a home and the possessions inside of it in the short term, as well as the potential for longer-term issues like mold and rot to emerge.
Because a homeowners insurance policy and other types of coverage generally do not provide protection against the damages caused by flooding, dedicated flood coverage is the only viable path forward. Through this type of policy, you can protect major possessions as well as the structure of your home itself — a covered claim will offer compensation for structural repair and replacement as well as major appliances and other valuables.
To better understand the widespread need for flood insurance, let’s take a look at how so many homeowners in Pennsylvania can protect themselves with this type of coverage. Except for relatively short stretches of the state that border the Delaware Bay and Lake Erie, Pennsylvania is mostly landlocked, despite the prevalence of lakes and rivers. Many homes in the Keystone State aren’t within sight of a major body of water — but many homeowners can still benefit from flood insurance.
Environmental changes mean more people are now at risk of flooding than in the past. In a review of related research, the Columbia University Climate School points out that FEMA estimates of the number of people in an area with a 1% risk of flooding on an annual basis, about 13 million, might be significantly lower than reality. As many as 41 million Americans face a significant flood risk, according to an analysis published by Environmental Research Letters and highlighted by Columbia.
Flooding can easily occur away from a property that directly abuts bodies of water due to factors including heavy rains, storm surges, and heavy ice and snow-melt. Natural disasters and catastrophic maintenance failures that affect dams and levees can also lead to flooding, even though there is no direct natural cause. With the prevalence of lakes and rivers throughout the state, a source of floodwater can easily be nearby — even if it isn’t visible from a property.
Thanks to the variety of potential causes, a flood can strike at nearly any time in Pennsylvania. With many other types of insurance specifically excluding flooding as a covered peril, a dedicated flood policy is crucial for protecting everything from the foundation, plumbing, and electrical wiring of your home to the jewelry, collectibles, and other valuables kept inside of it.
In Pennsylvania, and in all other states, you always have the option to purchase private flood insurance even if your home doesn’t sit in a high-risk floodplain, or if your community doesn’t follow NFIP standards.
As you make this decision, there are a few key facts you should keep in mind. You may be eligible for an NFIP flood insurance policy, and it’s worth at least looking into the possibility to see the cost of the premiums, coverage specifics, and other salient information. Keep in mind that NFIP coverage includes a 30-day waiting period after finalizing the purchase. Selecting a private policy can mean avoiding that delay. However, private flood insurance can potentially preclude you from accessing hazard mitigation grant programs offered through FEMA and NFIP.
Whether you live in Pennsylvania or anywhere else in the country, finding an effective policy is crucial for protecting your home and the valuable possessions inside of it.
There are a number of considerations to make as you seek out the flood insurance coverage that provides the best value. Cost is a foundational component of this process, but not the only one. If you purchase an NFIP policy, the cost will vary based on factors, ranging from your home’s location to the type of foundation in place and the total replacement cost. However, you can’t shop around when it comes to NFIP coverage. The price will remain the same even if you request more than one quote. NFIP policies can be more affordable for those who live in lower-risk flood zones. In these circumstances, special Preferred Risk coverage with lower premiums is available.
With private flood insurance, you have the added advantage of securing quotes from a variety of carriers. Because these companies ultimately want to secure more business, more competitive premium costs may be available to you. You can set similar parameters for each quote, then compare those policies based on their price as well as any variations in coverage specifics.
The Insurance Information Institute highlights the coverage maximums for NFIP policies. For single-family homes, the top limit is $250,000 for the structure. At most, another $100,000 of coverage can be included to protect the home’s contents. In some cases, high-net-worth individuals and families that purchase FNIP coverage also seek out private coverage to close the gap between that policy’s maximum and the total value of their home and possessions.
For private insurance, a significantly higher maximum is in place. Policies don’t have a set upper limit, and it’s entirely possible to secure $1 million in coverage. While an insurance company will exercise discretion because of the unique nature of flood insurance and the especially high costs involved, you may be able to secure an even larger amount of coverage in the right circumstances. Private insurance may also offer additional coverage options that a standardized NFIP policy can’t, such as extra living expenses following a covered incident and additional protection for outbuildings on your property.
A piece of good news for homeowners with comprehensive auto insurance policies, regardless of the type of flood insurance they ultimately purchase: That type of vehicle coverage generally incorporates flooding as a covered peril. If you make sure your specific policy offers that benefit, you won’t need to include your vehicle in the contents coverage.
Many insurers offer NFIP flood insurance policies, while only a small group of carriers offer private flood coverage. Quotes from an NFIP-approved insurer or agent tend to be lower than the alternative.
Beyond those considerations, and recognizing the unique nature of NFIP coverage, purchasing flood insurance is often similar to securing other policies. If you’re seeking out private coverage, whether due to personal preference, NFIP ineligibility, or a desire to completely protect your property beyond the limits of an NFIP policy, finding the best rate can lead to a substantial amount of legwork. When you choose to partner with an independent and experienced insurance advisor, you can bring their expertise to bear in finding effective policies while saving yourself valuable time.
Flood insurance involves some unique factors but shares a foundational similarity with many other types of coverage: It offers protection and peace of mind in the face of an uncertain future. A flood insurance policy could protect you, your family, and some of your most valuable property and possessions following a catastrophic loss.
The experienced professionals at National Advisors Group (NAG) can help you find the best possible coverage, one that offers effective protection and a strong overall value. We can determine if you qualify for a lower-cost NFIP Preferred Risk policy, find a private carrier that can properly and completely insure your luxury property, secure a flood insurance quote, and review NFIP and private policies to address all of your concerns.
We take a bespoke approach to insurance, recognizing that each and every one of our clients has unique priorities, needs, and risk tolerances. By advancing past the “one-size-fits-all” approach that’s so common in the insurance industry, we do more than simply bring you a flood insurance policy. We address all of your insurance needs by creating a complete plan for protection. You have the power to choose a more experienced, supportive, and engaged partner to address your insurance needs. Request your no-cost quote from National Advisors Group today!