What you should know about flood insurance

It was in 1968 that the United States Congress initiated the National Flood Insurance Program to reduce related private and commercial property damage. Available through insurance companies and insurance agencies, coverage is administered and dictated by government laws and can protect the homeowner from damage caused by flooding.

A Standard Home Insurance policy is understood to be the coverage of a one, two, three or four-family residential building, as well as a single-family home.

A general property flood policy may insure five or more family residential buildings, as well as buildings not used as residences.

A residential condominium association building policy may insure a residential condominium association building.

This type of policy must incorporate two types of related coverage: real property and personal property, defined as the contents of your premises.

Three essential things about a related insurance policy

• Contents coverage must be purchased separately from building coverage.
• Flood insurance is not valuable coverage, meaning it only covers actual damage up to the policy limit.

• Flood insurance does not offer guaranteed replacement cost coverage that is not subject to limits. Flood insurance only pays for damage up to the policy limit.

More things to understand

It is important to note that the government-run program provides special consideration when there are multiple flood claims filed by the same policyholder. Officially considered “severe repetitive loss,” where intervention may be warranted to prevent future loss, these claims may result in an offer of a FEMA mitigation grant, if applicable.

Acceptance of the grant is voluntary, but any policyholder who declines the opportunity for government-funded improvements that are designed to reduce the likelihood of property damage from flooding may be subject to a rate increase equal to one hundred and fifty percent of the rate charged for the property when the grant was offered.

Policyholders with serious repetitive loss properties may be eligible for the subsidy if the following conditions are met:

• 4 or more different insurance claim payments (including construction/contents payments) have been issued and each exceeds $5,000


• A minimum of 2 different building flood insurance claim payments have been issued that in total exceed the current value of the property

To learn more about flood insurance and how a respective policy can be tailored to your individual needs, contact an experienced independent agency.

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