I am going to start out by saying that we do not talk about Flood insurance much at Welch Financial Planning. A homeowner's policy excludes flood coverage. The reason for this is because flood policies are a separate product that is offered by the insurance industry and the Federal Emergency Management Agency (FEMA). You can get flood insurance with a specialty flood insurance provider or most insurance companies we offer have a flood insurance product.
There are a few things to know about floods and insurance:
I recently heard that ~25% of all flood incidents in Colorado were not in designated flood prone areas. Just because you are not in a designated flood zone does not mean you have no risk of flood damaging your home. Something to consider if you have thought about flood insurance before.
Forest fires can also increase the chance of a flood. Not as much water is absorbed into the ground because the fire kills the vegetation. This can lead to more runoff in areas that may not have had an issue before. There is an easy way to assess if you are at a high risk – look up from your property. If you can see damage from a forest fire, you may want to consider flood insurance when it may not have been needed before.
The last thing to be aware of is what a flood insurance policy covers. A flood policy is similar to the property portion of your homeowners policy. It covers your dwelling and the stuff inside. The coverage amounts are not based on the replacement costs of your home. There are various levels you can choose from like $100k dwelling coverage and $30k personal property coverage and there is a maximum coverage amount offered. Also, flood insurance has limited coverage for the basement. It will likely cover the foundation and other structural items of the home, but has limited coverage for basement finishes and personal property in the basement. Some insurance companies will offer additional coverage for your basement at an additional cost.
With the rain we have been getting this spring, make sure you are checking your home for leaks. Damage from rain is not covered by your homeowners policy and a flood policy will only cover ‘rain’ damage if an actual flood is created.
Insurance definition of a flood:
“A general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or two or more properties (at least one of which is your property) from: Overflow of inland waters, unusual and rapid accumulation or runoff of surface waters from any source, and mudflows.”
Wondering if you should purchase a flood insurance policy? Reach out today and we can discuss if it makes sense for you.
To your financial success,