Hurricane Florence: How flood insurance works

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Hurricane Florence: How flood insurance works

Janna Herron, USA TODAY
Published 4:44 p.m. ET Sept. 14, 2018 | Updated 10:37 a.m. ET Sept. 16, 2018

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Residents of Wilmington, North Carolina began assessing the early damage from Hurricane Florence Friday, hours after the storm made landfall as a Category 1 hurricane. (Sept. 14)
AP

Hurricane Florence, now a tropical storm, has dumped at least 2 feet of rain on the North Carolina coast and more is expected as the storm makes its way over the Tar Heel state and neighboring South Carolina. Many homeowners could face catastrophic flooding, and if they lack the right insurance, they could be left paying for the damage themselves.

Overall, 250,000 North Carolina homes are estimated to have been affected by the hurricane, according to CoreLogic, a property data analytics firm.

Unfortunately, homeowners insurance won’t cover any flooding-related losses. For about a half-century, it has excluded that coverage, according to Lynne McChristian, a spokeswoman for the Insurance Information Institute. Renters insurance also doesn’t cover flood damage.

“It’s an uninsurable risk,” she said, “because flooding causes such widespread damage to so many homes, it can wipe out an insurer.” Instead, the federal government plays insurer for the millions of homes in the highest flood-risk areas.

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What is flood insurance?

Flood insurance policies – separate from homeowners and renters insurance – are backed by the National Flood Insurance Program and are designed to replace your possessions and restore your home to its preflooding condition. NFIP policies cover up to $250,000 for your housing structure and up to an additional $100,000 for your possessions.

“The limits aren’t very high for some regions of the country,” said Tom Santos, vice president of federal affairs at the American Insurance Association. “So, homeowners (in those areas) should consider buying additional coverage from private insurers.”

Most mortgage lenders require flood insurance for homes located in high-risk flood areas. Similarly, if your home is in a high-risk flood zone and you previously received federal disaster assistance, you’re required to carry flood insurance to be eligible for any future federal aid.

How does it work?

There is a 30-day waiting period before flood insurance coverage kicks in, so you can’t quickly buy a policy as a hurricane approaches your state. The policy also must be renewed each year. If you realize you need coverage, plan ahead. Most homeowners insurance providers distribute NFIP policies, so contact your insurance agent or broker. Or you can get an agent referral from the NFIP help center at 1-800-427-4661.

How much you’ll pay depends on the deductible and your home’s characteristics, including its flood risk. While the average annual premium is $600 to $700, that’s really for those who live in a low- to moderate-risk flood zones, McChristian said. “If you live on the coast, it could be thousands of dollars because the risk is greater,” she said.

To file a claim for flood damage, contact your homeowners insurance provider as soon as weather conditions are safe. A claims adjuster will assess the damage and determine which policy will cover what damage. It’s important to provide an inventory and pictures of possessions, both before and after the event. Ultimately, the NFIP will cut the check to pay for losses associated with flooding.

What happens if you don’t have it?

If flooding damages your house but you don’t have flood insurance, be prepared to pay for most of the losses yourself. The Federal Emergency Management Agency does offer small disaster grants that average $5,000 per household, far less than the average flood insurance claim of $30,000. Still, it’s not nothing.

The Small Business Administration also provides homeowners and renters low-interest disaster loans that can be used to repair or replace houses and damaged property in disaster-declared areas. But these must be paid back eventually.

That’s why it’s important for homeowners and renters to assess their risk and consider adequate coverage. Flood insurance is not just for those in high-risk zones, either. One in five claims that the NFIP pays out goes to those who live in low- to moderate-risk flood zones.

“We have been telling folks that these storms like Florence and Harvey with days’ worth of heavy rains are happening with more frequency,” Santos said. “More people increasingly need flood insurance.”

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