Myths vs Facts About Flood Insurance

In the United States, floods are the most common and expensive natural disasters. If you live in a community that is part of the National Flood Insurance Program (NFIP), you can buy cheap insurance to protect your property from flood damage.

Still, a lot of property owners have wrong ideas about flood insurance, like whether or not they can get it, when they can buy it, how much it costs, etc.

Here are some common myths and facts about flood insurance and the National Flood Insurance Program (NFIP).

MYTH: If you live in a high-risk flood area, you can't buy flood insurance.

FACT: If your town or city is part of the NFIP, you can buy federal flood insurance no matter where you live. The National Flood Insurance Program (NFIP) was started in 1968 to help people who live in areas that are most likely to flood. These areas are called Special Flood Hazard Areas (SFHAs), but they are also called the 100-year floodplain or the regulatory floodplain.

Under the National Flood Insurance Act, borrowers whose property is in an SFHA must buy flood insurance in order to get a loan backed by the federal government.

Homes and businesses that are above or outside of a floodplain don't have to pay much for flood insurance, but homes in SFHAs may have to pay a lot more.

MYTH: You can't buy flood insurance right before a flood or while it's happening.

Anyone can buy flood insurance at any time. After you pay the premium, you have to wait 30 days before the policy goes into effect, with the following exceptions:

• If the first time you buy flood insurance is tied to getting a loan, increasing it, extending it, or renewing it. In these situations, there is no time to wait.
• If you buy flood insurance for the first time during the first year after a new Flood Insurance Rate Map is approved for a community, you only have to wait one day.

The policy does not cover a "loss in progress," which is a loss that has already happened as of 12:01 a.m. on the first day of the policy term, as defined by the NFIP. Also, you can't increase the amount of insurance coverage while a loss is happening.

MYTH: Flood damage is covered by homeowner's insurance.

FACT: Many people don't find out that their homeowner's insurance doesn't cover flooding until it's too late.

MYTH: Only people who own their own homes can get flood insurance.

FACT: Flood insurance can protect homes, condos, apartments, and other buildings that are not homes, such as businesses. Single-family homes can get up to $250,000 in building coverage, while multi-family homes can get up to $250,000 per unit. All residential buildings have a $100,000 limit on coverage for the things inside, and renters can also get this coverage. The building itself can be insured up to a limit of $500,000, and the contents can be insured up to the same limit.

MYTH: If your home has been flooded, you can't buy flood insurance.

No matter how many times your house, apartment, or business has been flooded, there is nothing you can do about it. You can still buy flood insurance as long as your community is part of the National Flood Insurance Program (NFIP).

MYTH: Only people who live in flood-prone areas need to get insurance for their homes.

Even if you don't live in a flood-prone area, it's a good idea to have flood insurance. Anyone can lose money because of floods. People who don't live in high-risk areas file more than 25% of all NFIP claims and get one-third of all flood disaster aid. The NFIP's preferred risk policies are made for homes in areas with low to moderate flood risks.

MYTH: The NFIP doesn't cover basements in any way.

FACT: Yes, it does. The National Fire Protection Association (NFIP) says that a basement is any part of a building where the floor is below ground level on all sides. An NFIP policy will cover the costs of cleaning up the basement as well as things like elevators, furnaces, hot water heaters, washers and dryers, air conditioners, freezers, utility connections, circuit breaker boxes, pumps, and solar energy storage tanks. The policy doesn't cover the things in a finished basement or improvements like finished walls, floors, and ceilings.

MYTH: Flood damage will be paid for by federal disaster aid.

FACT: A community must be named a federal disaster area before it can get help from the federal government during a disaster. This happens less than half of the time when flooding happens. When the government declares a disaster, the main way it helps is by giving a loan that must be paid back with interest. An NFIP policy has an average annual premium of $700, which is less than the average annual interest on most low-interest disaster loans. If you don't have flood insurance and get federal disaster aid after a flood, you'll need to buy flood insurance if you want to keep getting disaster aid in the future.

MYTH: The only way to get federal flood insurance is through the NFIP.

FACT: Write Your Own (WYO) companies sell and take care of most of the federal flood insurance. Through a special deal with the Federal Insurance Administration, these companies write and service policies without taking on any risk.

MYTH: The NFIP doesn't pay for flooding caused by rivers that are too full.

FACT: According to the National Flood Insurance Program (NFIP), covered flooding is a general and temporary situation in which the surface of normally dry land is partially or completely flooded. Two properties that are next to each other or at least two acres must be affected. Any of the following can lead to flooding:

• Overflow of water from the land or the sea.
• Surface water from any source, like heavy rain, that builds up or runs off quickly and in a way that is not normal.
• Flooding can cause mudslides or mudflows that look like a river of wet and moving mud.
• Land along the shore of a lake or other body of water that falls apart or becomes unstable because of erosion or waves.
• Water currents that are stronger than what is normal and cyclical.

MYTH: Rain that is driven by the wind is flooding.

FACT: Windstorm damage, not flood damage, is caused by rain coming in through broken windows or doors, holes in walls or the roof, or standing water or puddles. Federal flood insurance only pays for damage caused by flooding in the general sense, as described above. Most buildings with this kind of damage have a watermark that shows how high the water went before it went down. Even though wind and hail aren't covered by flood insurance, they are covered by most homeowner's policies.

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