Flooding and Insurance Coverage-What You Need to Know
March 7, 2010
As a homeowner, you should get a good understanding of your flood insurance policy regarding what is covered under your policy and and what is not covered and how items are valued when you have suffered a loss. Generally speaking there are two different types of flood insurance coverages available to homeowners: Building property insurance and personal property (contents) insurance. The National Flood Insurance Program (NFIP) in the United States encourages homeowners to buy both. Your mortgage lender may ask you to have a certain amount of flood insurance coverage so be sure to know what rules pertain to you at the time of taking out a mortgage.
Flood insurance covers losses you suffer at the hands of a flood. Simply put, a flood is an excessive amount of water on normally dry land. Water that enters your dwelling due to inland water overflow, land collapses and an unusual accumulation or run-off of surface water coming from any source define flood damage. A basic flood insurance policy pays for direct damage done to your possessions up to the actual cash value. Coverage for the contents of your home must be purchased separately. It is important that you select the proper amount for your deductibles. The same rules apply with flood coverage that pertain to your auto or homeowners insurance-choosing a high deductible will decrease the amount your premiums but will also reduce the amount of money you receive on a claim.
Any physical damage done to your home or personal property that is directly caused by a flood is covered by you flood insurance. You can expect compensation for your electrical and plumbing systems, refrigerators, stoves and dishwashers, permanent carpeting, paneling, bookcases and window blinds under building property coverage. Under personal property coverage things such as your furniture, clothing, curtains, small appliances, microwave ovens, portable air conditioners, original art work, freezers and the food in them are covered. Items that are not insured by either building property or personal property coverage include items damaged by mold and mildew (as this is considered to be preventable), valuable papers, coins and other precious metals.
The amount you are paid for the loss of your personal property in a flood is based on the Actual Cash Value or ACV. This is a set amount that is determined at the time of your loss, minus the value of an item’s depreciation. Take wall-to-wall carpeting for example. It loses about 13% of its value each year so this depreciation will be factored into the adjustment. Personal property is valued at the actual cash value when it comes to flood insurance. RCV is also used for determining your building damage compensation, but depreciation is not a factor.
