Understanding the Basics
By now, you probably know that only flood insurance covers flood damage, but you probably don't know all of the details. Here are a few of the more frequent terms:
Flood insurance can only be purchased through an insurance agent; you cannot buy it directly from the federal government. If your local insurance agent is unfamiliar with the NFIP you can:
As with any other type of insurance, it's important to know what your policy does and doesn't cover. For example, damage caused by a sewer backup is only covered by flood insurance if it's a direct result of flooding. The damage is not covered if the backup is caused by some other problem. For a complete summary of coverage, go to What's Covered.
Deductibles apply separately to building and contents with different amounts to choose from. Like other insurance plans, a higher deductible will lower the premium you pay but will also reduce your claim payment. Your mortgage lender can also set a maximum amount for your deductible.
Homes and businesses with mortgages from federally regulated or insured lenders in high-risk flood areas are required to have flood insurance. While flood insurance is not federally required if you live in a moderate-to-low risk flood area, it is still available and strongly recommended.
The NFIP, a federal program, offers flood insurance, which can be purchased through most leading insurance companies. Rates are set and do not differ from company to company or agent to agent. These rates depend on several factors, including the date and type of construction of your home, along with your area's level of risk. Most premiums include a Federal Policy Fee and ICC Premium. If your community participates in the Community Rating System (CRS), you may qualify for an insurance premium discount in some communities of up to 45% if you live in a high-risk area and up to 10% in moderate-to-low risk areas.
Typically, there's a 30-day waiting period from date of purchase before your policy goes into effect. Here are the only exceptions:
- If flood insurance is being purchased in connection with the making, increasing, extending or renewing of your loan.
- If a building has been newly designated in the SFHA and flood insurance is being purchased within the 13-month period following a map revision.
- If flood insurance is required as a result of a lender determining that a loan that does not have flood insurance coverage should be protected by flood insurance.
- If an additional amount of insurance is selected as an option on the renewal bill.
- If a property is affected by flooding on burned Federal land that is a result of, or is exacerbated by, post-wildfire conditions when the policy is purchased within 60 days of the fire containment date.
Payment must be made for the full year's premium. The National Flood Insurance Program accepts check and credit card payments (American Express, Discover Card, MasterCard or Visa).
A lot of things determine what policy is best for your business, so if you have questions, now's the time to ask.
If you're looking for an agent, here is a quick, handy tool that will help you get started.
PRIMARY RESIDENCE DISCLAIMER
For flood insurance rating purposes, a primary residence is a building that will be lived in by the insured or the insured's spouse for at least 80 percent of the 365 days following the policy effective date. If the building will be lived in for less than 80 percent of the policy year, it is considered to be a non-primary residence.