Due to the specific territorial location of the United States, the country is constantly exposed to natural disasters.
Floods, tornadoes, earthquakes – Americans are no strangers to these names.
Because of the increasing frequency of natural disasters and because of the large-scale damage caused to the U.S. economy by these disasters, the government has taken steps to create an insurance system to minimize losses and accumulate the capital needed to cover the costs caused by disasters.
Statistics show that 90 percent of all natural disasters in the U.S. are caused by floods. At the same time, areas with low flood risk account for about 20%.
Thus, for U.S. residents, the mechanism of compensation for losses from these weather-related disasters is the main task aimed at ensuring a peaceful and prosperous life.
Thus, the Federal Emergency Management Agency (FEMA) was created in the United States in 1978. It is a division of the U.S. Department of Homeland Security. The main function of FEMA is to eliminate the consequences of natural disasters, which cannot be dealt with by local authorities on their own.
Two years later, the U.S. created a special program to insure risks against the most common disaster in the U.S. – flooding. This program was passed in 1968 by the U.S. Congress and was called the National Flood Insurance Program (NFIP). It is subordinate to FEMA. This program is designed to address 2 main objectives:
Reduce the extent of flood damage by developing a highly specialized insurance market;
Limit floodplain development, thereby preventing and reducing the extent of damage.
So flood insurance is a separate insurance program that is not part of the general property insurance programs provided by private insurance companies. It is a federal program that can be used voluntarily by property owners or renters, especially in high risk areas.
This insurance is mandatory for mortgage lending when the property that is the subject of the loan agreement is located in a NFIP-eligible community. That said, as previously outlined, floodplain restriction is an important task of local government and the community. NFIP insurance is only available if work is underway to limit the extent of potential flood impacts.
Flood insurance covers:
- direct flood losses affecting the structure, appearance of the building and the contents of the house (these 2 insurances are sold separately);
- losses caused by erosion associated with floods;
- losses caused by waves or flows of water in excess of expected cyclic levels and accompanied by a severe storm
- flash flooding;
- abnormal tide
- a similar situation that results in flooding.
The maximum amount of flood coverage is $250,00. The maximum amount of coverage is $250,000 for exterior home coverage, structural damage, and $100,000 for interior damage. The maximum amount is $250,000 for interior damage. Note that the effective date of a NFIP insurance policy is 30 days from the date it is issued.
Private insurance companies offer “excess” flood insurance, which allows for up to $500,000 in reimbursement. The policy provides up to $500,000 separately for exterior and interior damage to the home.
Flood damage coverage for vehicles is covered under a standard automobile insurance policy.
What if the flood caused damage to your property and you didn’t take out an insurance policy? In this case, the federal government provides low-interest loans to help you recover your losses.
So, you need to adequately assess the likelihood of flooding in your area, and decide if you need to cover your expenses well in advance.
How does it work?
There is a 30-day waiting period – only after that time will the insurance take effect. So you can’t get insured quickly when a hurricane is already hitting your state. The policy should also be renewed annually.
If you realize you need coverage – plan ahead. Most insurers sell NFIP policies, so contact your insurance agent or broker. You can also get a referral agent by contacting the NFIP help center at 1-800-427-4661.
The amount you will pay depends on the features of the deductible and your home, including objective flood risks.
While the average annual premium is between $600 and $700, it is valid for those who live in low- and moderate-risk areas. “If you live on the coast, it could be thousands of dollars because the risk is greater,” the expert says.
To apply for flood damage, contact your homeowner’s service provider as soon as weather conditions normalize.
The damage will be assessed and determine which policy should cover which part of it. It is important to provide inventory and photos of the property, both before and after the flooding. Ultimately, the NFIP will reduce the check to pay for flood-related losses.
What happens if you don’t have insurance?
If a flood has caused damage to your home, but you don’t have flood insurance, be prepared to pay for most of the loss yourself.
The Federal Emergency Management Agency offers small disaster subsidies that average $5,000 per family, much less than the average insurance settlement of $30,000.
The Small Business Administration also provides low-interest loans to homeowners and renters that can be used to repair or replace homes and damaged property in areas declared disaster zones. But they must eventually be repaid.
That’s why it’s important that homeowners and renters assess their risk and provide adequate insurance coverage. Flood insurance isn’t just important for people in high-risk areas. One in five payments are made to people in low- and medium-risk areas.