Doubtless these words have been uttered by a great many people in the wake of the nearly unprecedented rainfall we experienced in the past couple of weeks. Listening to the news reports of loss and damage suffered by so many, I have been struck by the magnitude of the losses, the widespread misunderstandings and misconceptions that exist on the subject of insurance coverage, and that so few people had insurance. Perhaps the following will help.
From an insurance standpoint, there is a difference between a “flood” and “sewer backup.” The National Flood Insurance Program defines a “flood” as a general and temporary condition of complete or partial inundation of normally dry land by surface water. While flooding has been characterized as nature’s most common natural disaster, most homeowners insurance policies specifically exclude coverage for losses that result from a flood.
In 1968, the US Congress created the National Flood Insurance Program (NFIP) as a way to help property owners financially protect themselves from damages caused by flooding. NFIP offers flood insurance to property owners and renters if their local community participates in the NFIP. While rates are set by NFIP and do not vary from company to company, costs vary based upon the amount of insurance purchased, what is covered, and the property’s flood risk. Flood risk is based upon flood insurance studies conducted by FEMA, which then prepares flood hazard maps. NFIP insurance can be purchased through many insurance companies and agents. Homes and businesses with mortgages from federally regulated or insured lenders in high-risk flood areas are required to have flood insurance. Although not required, flood insurance is recommended for those in moderate-to-low risk flood areas.
While the causes of sewer backups are many and varied, they occur on a wide scale when massive volumes of water overload the municipal drainage system. Damage caused by a sewer backup may be covered by flood insurance if the backup is a direct result of flooding. Otherwise, most homeowners insurance policies exclude coverage for damage and losses caused by water or water-borne material that backs up through sewers or drains, or which overflows or is discharged from a sump pump. In most instances, a specific rider or endorsement is needed for this coverage with an additional premium. Deductibles, extent of coverage and coverage amounts vary widely. Unfortunately, in most instances, the available coverage will be lower than the ultimate loss.
If you were among the thousands affected by the recent storms, your only hope at this point may be disaster relief provided by the state or federal government. Looking forward, however, the time to act is now. (There is a thirty-day waiting period from the date of purchase, before an NFIP flood insurance policy can go into effect.) Take a look at your homeowners insurance policy and talk to your agent; find out where your property is ranked on the flood hazard map and determine what coverage best suits your needs and budget. Doing nothing should not be an option.
Additional information concerning the National Flood Insurance Program can be found at: https://www.floodsmart.gov/floodsmart