Dangerous Misconceptions People Have About Flood Insurance
If you’re a homeowner, then you know how important it is to have flood insurance. Although the popular saying is that what you don’t know won’t hurt you, this isn’t true when it comes to flood insurance.
The Cheat Sheet spoke to Sean Harper, founder and CEO of Kin, a digital home insurance provider, to learn more about flood insurance.
The Cheat Sheet: How does flood insurance work?
Sean Harper: Flood insurance can cover water damage to homes caused by storm surges or sewage and debris. It can also cover mudslides, broken water mains, and groundwater seepage. Some areas are low-lying and at a higher risk for flooding than others. In many high-risk areas, if you’re trying to secure a mortgage, your lender will typically require you to get flood insurance. FEMA and National Flood Insurance Program maps are a starting point for evaluating your flood risk, but they are often out of date. Also, even if you’re not in a high-risk area, you may still face flood risk.
CS: Generally, how long do you have to file a claim?
SH: Homeowners usually have a year to file a flood insurance claim. However, in order to get your payout faster, it’s smart to file as soon as possible.
CS: What are the most dangerous misconceptions homeowners have about flood insurance?
SH: Homeowners find themselves paying out hefty sums to cover damage from floods because of two critical mistakes:
- The first is that a lot of homeowners think their home insurance will cover flood damage. But home insurance only applies to water damage that originates inside the house, like from a burst pipe, for example.
- The second is that many people in lower-risk areas don’t think they need flood insurance. The reality is that 25% of floods occur in these areas. So, a lot of people get stuck paying for the flood damage out of pocket, which can be very expensive.
CS: What are some limitations of homeowner’s insurance when it comes to flood damage?
SH: Homeowner’s insurance doesn’t cover flooding from natural disasters like heavy rains or levee breaches. It only covers flooding that starts inside a person’s home, like from a leaky fridge. Most storm-related flooding starts outside the home, so a typical home policy wouldn’t cover it.
CS: What are some things flood insurance does and does not cover?
SH: Flood insurance does cover storm-related damage, but it doesn’t cover everything. Specifically, flood insurance doesn’t cover:
- Preventable moisture or mold/ mildew
- Cash, precious metals, or paper valuables (like legal documents, wills and trusts)
- Outdoor property, like patios, fences, decks, septic systems, and pools
- Additional living expenses when a flood makes the home uninhabitable
- Cars and other vehicles
- Damage from earthquakes caused by flooding (yes, this happens!)
CS: Could you provide tips on how to shop for the best flood insurance?
SH: To avoid paying too much for flood insurance (or not having enough coverage), it’s important to remember these three things:
- Know your risk level and how it affects pricing for home insurance. Residents in lower-risk areas pay less to insure their home (usually around $500 per year) while coverage in high-risk areas can run homeowners as much as $935 a year.
- Understand how much coverage you need. If you’re required to insure your home in order to get a mortgage, the amount of coverage you get should be equal to the cost of developing your property or the maximum coverage limit available, whichever is less. Another benchmark for how much insurance you’ll need is the total value of your property and belongings.
- Purchase your insurance policy as soon as possible. Many flood insurance policies don’t take effect until 30 days after purchase. Your best bet is to buy flood insurance well before hurricane or flood season begins.
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