Ever wondered “do I need flood insurance”? I've interviewed several people from the Texas Floods to answer this question + much more in this 3-part flood series.
We've got a flood insurance policy. It's a no-brainer purchase we renew without thought year after year.
Kind of like auto insurance.
I mean, when you figure out that your city's highest point above sea level is a measly 50 feet (yes, our city is Houston, just ravaged by Hurricane Harvey), and that flood damage is excluded from standard homeowner's insurance coverage…
But to be honest, I haven't really looked at our policy in the last five years of homeownership (pssst: not a homeowner? Here's information about renter's rights when property has been damaged by flood). The renewal paperwork comes in the mail, we stick with the middle-of-the-road $281 option (note: we're not located in a floodplain — just a few blocks away — which makes our plan option costs much lower), and so it goes.
Except here's the thing: remember those Memorial Day floods you watched on the news (or experienced firsthand) in Houston? Well, our home was just a few blocks away along the same bayou that swept anywhere from 1′-4′ of water right through peoples' front doors.
Note: Okay, you don't live in a floodplain and walking up your long, winding driveway can give you a nosebleed. Well guess what else causes a significant amount of flood damage in the US? Hurricanes, winter storms, and snowmelt. And according to the National Flood Insurance Program, all 50 states have experienced floods or flash floods in the last 5 years. So please keep reading.
Bayou Flooding a Mere Two Stop Signs from Our Home
I was in PA for my brother's wedding during the actual flooding, and my husband was home. He hadn't prepared me for what I was going to see when I flew in a week later:
Emergency response crews camped out in our local shopping center, a Red Cross team scouting the area, dumpsters lined up in people's front yards, debris piles stacked taller than myself as homeowners started the arduous task of ripping out what used to be their walls to attempt to stop Houston's notoriously humid summers from re-plastering them with mold…
It was all very shocking.
To give you an idea of the destruction, someone with a drone shot this video right around the corner of our home (hint: that HEB is still closed from the flood damage).
We were mighty close to dealing with disaster ourselves — so close, in fact, that our address has been cleared for Federal Disaster Assistance money — and feel blessed that we did not have to answer the question firsthand of what does flood insurance cover.
In the weeks following the flooding, I threw myself into all things flood. I joined a Houston Flood Facebook Group, and instead of rummaging through my friend's feeds, I read through victims' stories, questions, and information posted. I attended a really informational community meeting held by Mostyn Law firm where I met several people who have been severely affected (past tense doesn't seem appropriate, as it's going to take these guys a long time to get things back on track). And I interviewed several more.
What I needed and wanted to do was to better understand the financial implications of a flood for the more than 4,000 neighbors of mine currently dealing with the aftermath, least of which is having to submit their first claims against their flood insurance policies (despite several having lived in the same home, flood-free, for the last 50 or so years). I mean, what does flood insurance cover exactly? What does it all look like after the fact?
I was looking for the financial and personal aftermath, not just the 2-minute sound clip found on the news before moving onto the next national disaster.
I mean, what happens to the people whose lives have been turned upside down? How are they getting by? What's it like to submit a claim for flood insurance?
And *gulp* would our own flood insurance policy have been enough to get us back on our feet if we had been affected?
What is Flood Insurance?
Most private insurance companies do not offer flood insurance. This is because of something called Adverse Selection, where people who are going to use this type of insurance are likely the only ones who will buy it. So it would bankrupt companies.
Yes, you may be able to find private flood insurance policies (and some people get private as a supplement to their federal program coverage). But generally speaking, the majority of people with flood insurance find a policy through the National Flood Insurance Program (NFIP). It's a federally-backed insurance sold through private insurance companies but managed by the Federal Emergency Management Agency (FEMA).
The absolute maximum coverage amounts you can get for one-four family residential properties through the NFIP is $250,000 for structures and $100,000 for home contents.
Here is a link to a standard flood insurance policy to give you an idea of what it does and does not cover.
Do I Have to Be In a Flood Zone to Get Flood Insurance?
The simple answer: absolutely not.
Not only can you buy flood insurance outside of a flood zone (USAA offers flood insurance policies), but it's recommended.
Look at the stats: 30% of all flood insurance claims are filed in low-to-moderate risk areas.
Straight from the horse's mouth (FEMA):
“People outside of high-risk flood zones file more than 20 percent of all NFIP claims and receive one-third of federal disaster assistance for flooding.”
Big Differences Between Flood Insurance and Homeowner's Insurance
I met Patricia Burns Merritt (Pat) in one of the Facebook Groups I joined. She's lived in our neighborhood for a long time, and has had to put in one claim on her Homeowner's Insurance and now one claim on her Flood Insurance in the 51 years she's been in her Houston home.
Her experience with submitting a claim to each sheds light on some of the differences between these two types of insurances.
“Not really a surprise, but flood insurance does not pay for packing, storage or relocation expenses. About 21 years ago we had an electrical fire and had to move out while everything was removed and ozoned for smoke damage. My homeowners insurance paid for everything, including a rental house, mileage, food, packing and unpacking and the two moves to and from the rental. I didn’t have to do a thing but point to what I wanted moved to the rental. That took the sting out of an otherwise miserable three months.”
Here are some other specific differences between the two:
- Unlike homeowners' policies, flood policies do not pay temporary relocation costs, such as hotels or apartments (this does not mean that you cannot get assistance in a declared disaster area–see below).
- Flood policies do not pay for damage in a basement, other than to the heating, air conditioning and water systems.
- Flood policies generally only pay for the Actual Cash Value of damaged personal property (so they deduct depreciation), rather than their replacement costs like a homeowner's insurance does. Pat explained, “FEMA depreciates each item that does not have a RECENT APPRAISAL. We had appraisals on four items: piano, two rugs, a grandfather clock. They have to pay the appraised value. Everything else is depreciated.”
- You cannot collect attorney's fees on top of winnings if you sue for more money, like you can with homeowner's insurance.
Process for Filing a Flood Insurance Claim (and What to Do If You Don't have Flood Insurance)
And yet despite its limitations, having flood insurance is way better than not having it if you ever have to face a flooding disaster. Tweet this!
It's helpful to understand the overall process of how to file a claim, specifically since various levels of support/aid from various levels of government can quickly get overwhelming.
If you have flood insurance, here's what you do:
- Call Your Insurance Agent to File a Claim: The flood insurance program is administered, regulated, and backed by the federal government (National Flood Insurance Program, or NFIP). However, policies are mainly sold through private agents. Whichever agency you have your flood insurance through, you need to call them. They are the ones you'll be filing a claim with (unless you have a direct policy with FEMA; the majority of people have a policy through private insurers). Obtain a claim number. Also, notify them of your temporary/current address (as you may not be able to live in your home any longer and they'll mail you time-sensitive items). When you submit your claim to your insurance agent, get something in writing from them that you submitted it + they received it (even an email).
- Register with FEMA: Go to DisasterAssistance.gov and register with FEMA. This ensures you get any future grant help that may be available to you (on top of your flood insurance policy payout).
- Work with Your Adjuster(s): There is your insurance adjuster, and then there is a FEMA adjuster. The first is for your flood insurance policy under NFIP, and the second is for any emergency aid. Depending on how big the disaster, there may be teams of adjusters coming in from across the country to deal with the floods. You don't want to throw away your damaged items (if you can help it) before your adjuster sees them. If you must throw something away, document it with photographs, receipts, and whatever else you've got to show evidence of its value/existence. And Mostyn Law Firm suggests that you keep a paper trail with your adjuster by sending them a rundown of your discussions by email. This is in case your insurance company doesn't agree with something down the road when your adjuster has likely moved onto the next disaster. Also a tip from Mostyn Law firm, if you don't agree with the adjuster numbers on the proof of loss form, still sign it, but put a statement above your signature to the effect of, “I disagree with the amount; however I'm signing this so that I can get the money that's there.”
- Get Your Proof of Loss in Before the 60-Day Deadline: Your Proof of Loss — a form you sign and submit with the amount you're requesting, supporting documentation, and a sworn statement by you of its accuracy — has to be filed by day 60 from the date of the flood. There can be extensions granted, such as here in Houston, where there was an extension granted for everyone with FEMA insurance (the extension does not include you if you have a private policy) for 240 days after the day of the flood. Note: this is not your claim with your insurance company. But it's extremely important. An example of what one may look like is here.
So, are you totally screwed if you didn't sign onto a flood insurance policy at least 30 days before a flood occurs (the length of time it usually takes for a policy to take effect)?
Will FEMA Help If I Don't Have Flood Insurance?
You still might be wondering, “do I need flood insurance”?
In case you go without it, I want to talk about what happens.
Here's what happens if you don't have flood insurance (your to-do list):
- Register with FEMA: Go to DisasterAssistance.gov and register with FEMA. This ensures you get any future grant help that may be available to you. Disaster assistance is for losses not covered by insurance, and is only available in counties that have been declared as federal disasters. It should be noted that this type of assistance does not count as income. Lodging/hotel expenses may be eligible for reimbursement if the home was damaged to the extent you could not return for an extended period of time, so keep those hotel/motel receipts just in case. There is also Housing Assistance from FEMA, which has a Repair Assistance component, that you might be eligible for. “Housing assistance can include reimbursement for short term hotel expenses; money to rent a place to live for up to 18 months while your home is being repaired; money to repair damage to your home; or money to help you purchase a new home if your home is destroyed. Financial grants from FEMA are taxpayer funded and have a maximum fiscal year dollar amount which is tied to the year the disaster was declared.”
- Contact Your Homeowner's Insurance: Pat says that her homeowner's insurance let her know her homeowner's insurance covers nothing from this flood (she contacted them because her flood insurance is through them). However, FEMA says, “If you have Homeowner's Insurance, you may want to contact your insurance company regarding Loss of Use or Additional Living Expenses (ALE) for evacuation purposes.” It is certainly worth it to call your homeowner's insurance and see if they will cover anything at all (though don't expect it).
- Work with Any Inspectors: During the application review process, FEMA may call to schedule an inspection of your home.
- Stay in the Know: Going to community meetings, and joining popup Facebook groups will get you information that could make a real difference to you. I've learned a wealth of information from the Facebook Group I joined, such as how people in our county can get an extension on filing taxes with the IRS, and can get an exemption on sales taxes paid to make repairs to their home.
Part 1 has been a rundown of what's going on in my neck of the woods, as well as the basics behind your flood insurance policy. See below for the next two parts where I discuss some of the less-common, more colorful experiences of flood insurance policy claims, as well as learn more about what happens if you don't have flood insurance.
Flood Insurance Crash Course Series:
Flood Insurance Crash Course Part 1: Do I Need Flood Insurance?
Flood Insurance Crash Course Part 2 : What Does Flood Insurance Cover + What the Claims Process Looks Like
Flood Insurance Crash Course Part 3: How It Would have Gone if We Had Flood Damage
Flood Insurance Crash Course Part 4: 10 Surprising FEMA flood Claims Money Realities I Learned
Flood Insurance Crash Course Part 5: We Submit Our First Flood Insurance Claims Process