Flood Insurance

Example

“After Hurricane Harvey flooded their home, the Johnsons were grateful they had purchased flood insurance, which covered $150,000 in structural damage that their homeowners policy excluded.”

Memory Tip

Remember 'Water Woes = Separate Coverage' - water damage from floods requires separate insurance from your regular homeowners policy.

Why It Matters

Flood insurance protects one of most people's largest investments - their home - from a disaster that causes billions in damage annually. Without it, homeowners face potentially devastating financial losses that could take decades to recover from.

Common Misconception

Many people believe their homeowners insurance covers flood damage, but standard policies explicitly exclude flooding. Additionally, people think you need to live in a high-risk flood zone to need coverage, but FEMA reports that 25% of flood claims come from moderate-to-low risk areas.

In Practice

A homeowner purchases NFIP flood insurance with $250,000 building coverage and $100,000 contents coverage for an annual premium of $1,200. When a flash flood causes $75,000 in damage to their home and destroys $25,000 worth of belongings, the flood insurance covers the full $100,000 loss after a $1,000 deductible, leaving them with only $1,000 out-of-pocket costs.

Etymology

The National Flood Insurance Program was created by Congress in 1968 following Hurricane Betsy in 1965, when it became clear that private insurers couldn't adequately cover flood risks.

Common Misspellings

Related Terms

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