Flood insurance
Flood insurance denotes a specific insurance coverage against property loss from flooding. To determine risk factors for specific properties, insurers will often refer to topographical maps which denote lowlands and floodplains which are susceptible to flooding.
Nationwide, only 20% of American homes at risk for floods are covered by flood insurance. Private insurers are unable to insure against the peril of flood due to the prevalence of adverse selection, which is the purchase of insurance by persons most affected by the specific peril of flood.
The lack of flood insurance can be detrimental to many homeowners who may discover only after the damage has been done that their standard insurance policies do not cover flooding.
Flooding is defined by the National Flood Insurance Program as a general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or two or more properties (at least one of which is your property) from: Overflow of inland waters, unusual and rapid accumulation or runoff of surface waters.
Even though a homeowner may have earthquake coverage, that coverage may not cover floods as a result of earthquakes.
The National Association of Insurance Commissioners (NAIC) found that 33 percent of U.S. household still hold the false belief that flood damage is covered by a standard homeowners policy. FEMA states approximately 50% of low flood zone risk borrowers think they are ineligible and CAN NOT buy flood insurance. Anyone can buy flood insurance as long as their community participates in the NFIP, even renters.
You must purchase a separate flood insurance policy through an insurance company that participates in the National Flood Insurance Program (NFIP).
Flood insurance is available for residents of approximately 19,000 communities nationwide.
