The program is constantly being improved with new funding being added over the years as it responds to increased natural disasters such as Hurricane Hugo in 1989, Hurricane Katrina in 2005, and Hurricane Harvey in 2017. Since its inception, the NFIP has provided flood insurance coverage to over five million policyholders across the country. The goal of the program is to protect the financial loss suffered by the property owner (both business and residential) while also reducing the amount of future flood damage. The program was started as a response to rising costs faced by Americans when they experienced flood loss and found that federal emergency assistance wasn’t enough. The program is managed by the Federal Emergency Management Agency (FEMA). The National Flood Insurance Program (NFIP) became federal law in 1968. What Is the National Flood Insurance Program (NFIP)? Additionally, flood insurance may be purchased by a renter, but this policy would only include contents coverage, not structural. This type of coverage is often optional, but if you live in a high-risk area, your lender may require you to purchase a flood policy. Policyholders pay a monthly or yearly premium and in return get a cash reimbursement for the cost to repair or replace a damaged structure or damaged personal property.
Importantly, this is different from regular homeowners insurance which also covers water damage but in a more limited context, typically only including internal damage like burst pipes. Insurance companies will only pay out in the event of water damage to their home from a flood – not other types of water damage. A burst pipe may be covered by a homeowners policy or home warranty, but flood damage is almost always excluded from homeowners insurance policies.įlood insurance must be purchased separately. This is in contrast to other forms of water damage that can occur in a home due to a burst pipe, leaky faucet, backed-up sewer, roof leak, or an older water heater. Floods typically cause extreme damage and are often categorized as a natural disaster or “vis major,” which is a Latin term used in insurance contracts to describe damage caused by a natural occurrence like a hurricane, flood, or earthquake. What Is Flood Insurance?įlood insurance is a type of property insurance that covers water damage specifically due to a flood. It’s important to understand the basics of what flood insurance does and does not cover, what kind of property owners will likely benefit from it most, and what your options are when choosing an insurance company. Like any home insurance policy, you’ll need to balance the risk versus the reward of paying for a policy that you may never need. However, even a seemingly small amount of water can produce devastating flood damage, and federal disaster assistance funds can only go so far. Therefore, not everyone will need (or want) to purchase flood coverage.
10 Best Flood Insurance Companies in 2023ĭepending on what part of the country you live in, you have a different level of risk for flooding. Most homeowners insurance plans do not cover flood damage, so flood insurance must be purchased separately. For homeowners, one type of insurance that’s often overlooked is flood insurance. Though shopping for coverage can feel overwhelming at times, insurance serves an essential function to keep our bodies and possessions protected now and in the future. From health insurance and life to car insurance to homeowners insurance, insurance policies offer many different types of coverage. There are many different types of insurance that can help protect you and your property.
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