Flood Insurance vs Home Insurance: Flood insurance specifically covers damages caused by the rising of a body of water that covers normally dry land, such as rainstorms that flood your yard or lakes that overflow. On the other hand, home insurance may pay for water damage due to broken pipes or other incidents, but it won’t cover flood damage.
When it comes to protecting your home from unexpected disasters, understanding the differences between flood insurance and home insurance is crucial. Although both types of insurance provide coverage for your property, they serve distinct purposes and cover different risks. Let’s explore the key differences between flood insurance and home insurance to help you make informed decisions about safeguarding your home.
What is Flood Insurance?
Flood insurance is a type of property insurance that covers a dwelling for losses sustained by water damage, specifically due to flooding. Floods can be caused by heavy or prolonged rain, melting snow, coastal storm surges, blocked storm drainage systems, or levee dam failure. To determine risk factors for specific properties, insurers often refer to topographical maps that denote lowlands, floodplains, and other areas susceptible to flooding.
A flood insurance policy is different from the basic hazard insurance coverage contained in a homeowners insurance policy. While standard homeowners insurance covers interior water damage caused by factors like storms or burst pipes, it generally doesn’t cover destruction or damage caused by floodwaters. Property owners who live in areas prone to floods usually need to get special insurance. Here’s how flood insurance works:
- Annual Premium and Deductible: The insured (the property owner) pays an annual premium based on the property’s flood risk and the deductible they choose. The deductible is the portion of the claim that the property owner must pay out of pocket. A policy with a higher deductible will likely have a lower monthly premium, and vice versa.
- Coverage: If the property or its contents are damaged or destroyed by flooding caused by an external event like rain, snow, storms, or collapsed infrastructure, the homeowner is covered. They receive cash up to the policy limit for the amount required to repair the damage or rebuild the structure.
- Separate Policies: Unlike a standard homeowners policy, flood insurance requires that a policyholder buy separate policies to cover a dwelling and its contents. A separate coverage rider is need to cover sewer backup if the backup was not cause by the rising floodwaters.
- Federal Backed Mortgage Requirement: Flood insurance is required for a federally backed mortgage of a property in a federally designated flood zone—an area at high risk of flooding due to heavy rains, flash flooding, and mudflows.
What is Home Insurance?
Home insurance is a form of property insurance that covers losses and damages to your residence, along with furnishings and other assets in the home. It provides protection for both the structure of your home and the contents within it. Home insurance typically protects against risks such as fire, theft, vandalism, and certain natural disasters like windstorms. However, it does not typically cover damage caused by flooding. It includes the following:
- Interior Damage: This includes damage caused by events like burst pipes, electrical fires, or other accidents within the home.
- Exterior Damage: Coverage extends to damage caused by external factors such as storms, hail, or falling trees.
- Loss or Damage of Personal Assets: If your belongings (furniture, electronics, clothing, etc.) are damage or stolen, the policy helps cover the cost of replacement.
- Injury on the Property: Home insurance also provides liability coverage in case someone gets injury while on your property.
Every homeowners insurance policy has a liability limit. This determines the coverage amount for property structures, personal belongings, and costs related to living elsewhere while repairs are underway. Standard limits are usually around $100,000, but you can often choose a higher limit. When you make a claim, you’ll typically need to pay a deductible. The deductible amount is the portion of the claim that you’re responsible for covering out of pocket. Higher deductibles usually result in lower monthly or annual premiums.
Flood Insurance vs Home Insurance
| Aspect | Flood Insurance | Home Insurance |
|---|---|---|
| Coverage | Specifically covers damage caused by flooding. | Covers a range of risks like fire, theft, and certain natural disasters, but typically excludes flood damage. |
| Purpose | Designed to protect against flood-related losses. | Provides comprehensive protection for your home, belongings, and liability. |
| Required Areas | Typically required for properties in federally designated flood zones. | Not mandatory for all homeowners but recommended for anyone who owns a home. |
| Purchase | Separate policy | Often bundled with homeowners policy |
| Policy Structure | Separate policies for dwelling and contents. | Single policy covering both structure and personal property. |
| Best for | Flood-prone areas or peace of mind | Most homeowners. |
| Exclusions | Usually excludes acts of war and acts of God (e.g., earthquakes, floods). | Exclusions vary but may include certain natural disasters or intentional acts. |
How to choose between Flood Insurance and Home Insurance?
While home insurance offers broad coverage for various risks, including fire and theft, it may not protect your home against flood damage. If you live in a flood-prone area or near a body of water, purchasing flood insurance is crucial to ensure your home is adequately protected. By having both home insurance and flood insurance, you can safeguard your property against a wide range of risks and have peace of mind knowing that you are prepared for unexpected disasters.
When do you need both Insurances?
If you live in an area at risk of flooding, it is essential to purchase both home and flood insurance. Home insurance will provide coverage for perils such as fire and theft. While flood insurance will protect your home and belongings from flood-related damages.
Conclusion
Understanding the distinctions between flood insurance and home insurance is essential for homeowners looking to protect their properties effectively. By evaluating your specific needs, assessing your risk exposure, and considering your location, you can make informed decisions about purchasing the right insurance coverage to safeguard your home and belongings.