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what is flood insurance and what does it cover

13 Nov What is Flood Insurance?

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What is Flood Insurance?

Most of us are well aware of the devastating images captured in flooded areas around the country.  Flooding causes damage and destruction to many homes and businesses in many communities.  Flood insurance is available to help alleviate repair and restoration costs to those whose homes or businesses have suffered damage due to flooding.

Congress created the National Flood Insurance Program (NFIP) in 1968.  This program is overseen by the Federal Emergency Management Agency (FEMA).  The NFIP is designed to facilitate the purchase of flood insurance for homeowners, business owners and renters.

Flooding can occur anywhere, and all properties are at risk for flooding.  It is important to note that most homeowners or renters’ insurance policies do not cover flooding.  Separate flood insurance is necessary, and in some places, required.

Generally, there are two categories for regions with regards to flood risk.  The first is known as a Special Flood Hazard Area, or SFHA.  This is the high-risk area.  Moderate to low risk areas fall under the second category.

People who live in an SFHA must purchase flood insurance if they have obtained a loan from a federally regulated and insured lender, and must carry the flood insurance for the duration of the loan.  People who live outside the SHFA areas are not required to purchase flood insurance, but it is recommended. It might also be possible for those living in low-risk areas to find lower cost insurance policies.  Flood insurance can be purchased through regulated and licensed insurance agents.  FloodSmart.gov offers assistance in locating insurance providers.

Flood insurance for homeowners can cover replacement and repair costs for the home for up to $250,000, and the contents for up to $100,000.  Renters can insure their belongings for up to $100,000.  Non-residential property owners can insure their buildings and contents for up to $500,000.  Premiums for yearly flood insurance generally cost around $700 per year. (FEMA, 2015)

It is important to understand what is and isn’t covered by your flood insurance. Information can be found at fema.gov, and by talking with your insurance agent.  It is equally important to remember that flooding can occur regardless of your proximity to bodies of water, as even areas of low-risk can suffer devastating damages.


FEMA. (2015, March 31). Flood Insurance: How It Works. Retrieved from fema.gov: http://www.fema.gov/media-library-data/1427811288492-36fb55e74d14c318db2996580527d131/Flood_Insurance_How_It_Works.pdf

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