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5 Things to Keep in Mind About Flood Insurance

September 7, 2017

The flooding wasn’t on the level seen in Houston post-Harvey, nor was it on the scale of the lashing Irma inflicted on the Caribbean. It certainly wasn’t biblical. But the 2013 storm that dumped 17 inches in some parts of Colorado was big enough to prompt many to wonder about their flood insurance.

CCIG’s Cindy Hegarty

Did they even have flood coverage? What did it cover, exactly? And how much in coverage had they bought?

The answers – too often for those who had suffered the most – were no, nothing and none.

Because they don’t live in a flood plain and are thus not required by their home mortgage lender to buy it, most Coloradoans, and in fact, most Americans, don’t have flood insurance.

Consider that only about one-fifth of Hurricane Harvey’s victims were insured for flood risk. Those without insurance will likely receive some federal assistance, but most of the uninsured will likely not see enough aid, and the recovery process for them will no doubt prove lengthy and arduous.

If your house is on a hill, going without flood insurance is probably a fine hedge. But given how inexpensive flood coverage can be, there may be good reason to consider it. Same goes if you live in an area where new homes are going up faster than the infrastructure can accommodate, where drainage systems seem to be overwhelmed anytime the rains are heavier than normal. It’s also a good idea to consider buying a flood insurance policy if your house could be flooded by melting snow, an overflowing creek or pond or water running down a steep hill.

If Harvey and Irma and whatever next disaster is next in line has you in the market for flood insurance, here are five things to keep in mind:

  1. Your homeowner’s policy covers rain damage but it does not cover flooding in your home. That’s why you’ll need a flood policy, which is a standalone policy, with different damage limits and separate premiums.
  2. Don’t wait for a flood season warning on the evening news to buy a policy. There is often a 30-day waiting period before the coverage takes effect.
  3. Private insurance companies sell little of it, so most flood insurance policies are available through the National Flood Insurance Program, a debt-ridden government program that is in dire need of an overhaul.
  4. NFIP plans cover up to $250,000 for the structure of the home and $100,000 for personal possessions. Depending on the size of your home and where you live, $350,000 may not be nearly enough. Also, NFIP policies only provide “actual cash value” coverage for your possessions. ACV is replacement cost coverage minus depreciation so that the older your possessions are, the less you will get if they are damaged. There may also be limits on coverage for basements, even finished ones.
  5. Many flood-plain maps are outdated. That means you could be living in an area more prone to flooding than you – or your bank – believes. Also, the data that determines whether someone is required to buy flood coverage measures risk frequency, not the severity of flooding. Remember, too, that most of the Houston metropolitan area is outside that area’s so-called 100-year flood zone, but flooded anyway. That’s why some FEMA administrators have called it a 1,000-year flood.

Harvey and Irma renewed calls for what’s known as all-hazards insurance, which would include coverage for flooding.

With such a system in place, everyone would pay for flood coverage, whether they lived in a flood plain or not. It also would encourage more private insurers to enter the market.

A growing number of carriers are, in fact, interested in entering the flood insurance market, seeing it as an untapped market. Thanks to regulatory changes enacted in Florida in 2014, at least 20 insurers offer various types of private flood insurance coverage in the Sunshine State.

More entrants in the market would be good, especially because the government flood insurance program owes $24.6 billion to the U.S. Treasury and has a $30.4 billion borrowing limit. In other words, unless Congress adopts reforms, it could be out of money soon, leaving many Harvey and Irma victims to pray for a taxpayer bailout.

Changes to the flood program are expected to be debated on Capitol Hill this fall.

One point lawmakers will want to consider: Ninety percent of all natural disasters in this country involve flooding. Since the inception of the national flood insurance program, some 25 to 30 percent of all paid losses were for damage in areas not officially designated at the time of loss as Special Flood Hazard Areas – including areas hit hardest in that three-day deluge that swamped parts of Colorado in 2013.

Cindy Hegarty is CCIG personal lines account manager. She can be reached at 720-212-2062 or

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