How to be informed and insured in light of flooding and water damage
By: JOY HATCHETTE, ASSOCIATE COMMISSIONER OF CONSUMER EDUCATION & ADVOCACY FOR THE MARYLAND INSURANCE ADMINISTRATION
Homeowners policies do not cover all types of water damage. While the terms of your policy will determine what types of water damage are covered and the amount of coverage available, generally homeowners policies do not cover flooding. The Standard Flood Insurance Policy, available for purchase from the National Flood Insurance Program (“NFIP”), defines “flood” as:
• a general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties (at least one of which is your property) from:
• overflow of inland or tidal waters;
• unusual and rapid accumulation or runoff of surface waters from any source;
• mudflow (mudflow is defined as “A river of liquid and flowing mud on the surfaces of normally dry land areas, as when earth is carried by a current of water . . .”); or
• collapse or subsidence of land along the shore of a lake or similar body of water as a result of erosion or undermining caused by waves or currents of water exceeding anticipated cyclical levels that result in a flood as defined above.
If water enters your home in one of these ways and causes damage, this would be considered a flood and your homeowners policy would NOT pay for that damage; instead, you would need to have a flood insurance policy.
But if the water seepage is not the result of a flood, you will not have coverage under your flood policy. For example, if surface water or sub-surface water seeps into your basement through a foundation wall or floor, a flood policy will not cover the damages. Generally, you will NOT be covered for the resulting damages under your homeowners policy either. Problems from seepage are considered maintenance issues and are generally not covered by insurance.
On the other hand, if water overflows a sump pump or sewage enters your home through pipes or drains designed to carry it away, your homeowners insurance may provide coverage if you have purchased a water/ sewer back-up endorsement from your insurance company. If you have this coverage, most policies will pay for the damage done by the water or sewage that backs up into your home; however, most policies will not cover the cost to repair or replace the pipe or drain. While the scope and amount of coverage will be established by your homeowners policy, Maryland law requires that your insurance company offer you this type of coverage and most companies offer several different coverage limit options.
Finally, if a pipe in your home suddenly bursts and water flows all over the floors, generally a homeowners policy will cover the damage caused by the water. However, generally repair or replacement of the pipe is not covered. You should check the terms of your policy to learn more about the scope and amount of coverage your specific policy provides. Should I consider buying flood insurance?
If your home or business could be damaged by rising water, you should consider buying flood insurance. Even if you are not in a flood zone, you may be at risk for flooding. Talk to a trusted insurance advisor about your options. Flooding is the nation’s most common and costly natural disaster. It causes billions of dollars in damage each year. Floods can happen anywhere. More than 20% of flood claims come from properties outside of the high-risk flood zone. You should at least investigate and make an informed decision. Who Can Purchase Flood Insurance?
Flood coverage is available for any building located in a community that has qualified for the National Flood Insurance Program (NFIP). This means that buildings do not have to be located in a floodplain to be eligible for coverage. Nor do you need to be located near a body of water to be at risk for flood damage. Floods are often caused by storms, melting snow, hurricanes, heavy rain, dam failures or other causes. Can Businesses and Renters Purchase Flood Insurance?
Yes, homeowners, condominium owners, renters and business owners can all purchase flood insurance. What does flood insurance cover?
Your policy terms will dictate what is covered should you incur damage from a flood. Typically it covers damage caused by a general and temporary condition of partial or complete inundation of two or more acres of normally dry land or of two or more properties from the overflow of inland or tidal waters; unusual and rapid accumulation or runoff of surface waters from any source; mudflow or collapse or subsidence of land along the shore of a lake or similar body of water as a result of erosion or undermining caused by waves or currents of water exceeding anticipated cyclical levels that result in a flood.
There are two types of coverage available under the National Flood Insurance Program: structural coverage for walls, floors, insulation, furnace and items that are attached permanently to the insured structure and contents coverage for your personal property. These coverages are purchased separately and carry separate deductibles.
Homes can be insured up to $250,000; furnishings and contents coverage is available up to $100,000. Commercial property limits are $500,000 on the building and $500,000 on contents. Is Wind-Driven Rain Considered Flooding?
No. Rain entering through wind-damaged windows, doors or a hole in a wall or roof that results in standing water or puddles is considered windstorm damage, not flood damage. The NFIP only covers damage caused by a general condition of flooding (defined as a general and temporary condition during which the surface of normally dry land is partially or completely inundated). Flooding typically is caused by storm surge, wave wash, tidal waves or the overflow of any body of water over normally dry land areas. Buildings that sustain this type of damage usually have a high-water mark showing how high the water rose before it subsided. Although the Standard Flood Insurance Policy (SFIP) specifically excludes wind and hail damage, many homeowners policies provide coverage for this type of damage. Check your policy to see if this is included. Does a Flood Policy Cover My Basement?
While flood insurance does not cover basement improvements such as finished walls, floors, or ceilings, or personal belongings kept in a basement, it does cover structural elements, essential equipment, and other basic items normally located in a basement. (For example unimproved structural parts such as walls, foundation and utility connections are covered.) Coverage usually applies to sump pumps, water tanks, furnaces, air conditioners and clean-up as part of the structural coverage. Finished portions of a basement, by law, are not covered.
The NFIP generally defines a basement as any area of a building with a floor that is below ground level on all sides. Is Flood Insurance Ver y Expensive?
The amount you will pay for flood insurance will depend on your risk. If your home or business is in a high-risk area, you will pay more than someone that is in a moderate to low-risk area. Talk to your community’s floodplain manager to find out your property’s level of risk. In addition, your premiums are based on the elevation of the structure as well as the deductible you select. How Do I Purchase Flood Insurance?
Start by talking with your trusted insurance advisor. If your agent does not sell flood insurance, you can find an agent by contacting the National Flood Insurance Program (NFIP), https://www.floodsmart.gov/. How Long Will it Take for My Policy to be Effective?
Normally there is a 30-day waiting period for the policy to be effective. There is an exception if the purchase of flood insurance is in connection with extending or renewing a mortgage loan.