Homeowners have shared with Extension some of the common misconceptions about flood insurance that caused them to suffer financial losses greater than they expected. Here are some things they found out the hard way:
- Contents coverage doesn't "come with" building coverage, except in the Preferred Risk policy, which is available only outside the special flood hazard areas. You have to tell the agent you want contents coverage. Check your policy declarations page or ask your agent whether you have contents coverage.
- Most people underestimate the value of their furniture and personal property. Take the time to determine a realistic value; you can't claim more than the amount of coverage you have purchased.
- There is a 30-day waiting period before flood insurance becomes effective. The waiting period is waived under certain circumstances.
- A mortgage company must purchase flood insurance for real property in the SFHA if the owner doesn't buy it within 45 days of being notified that insurance is required. The mortgage company will pay a higher rate than you would for the same coverage.
- If you rent your home or office, you can purchase flood insurance for your belongings. The building must be insurable, but it doesn't have to be insured. (To be insurable a building must have two rigid walls and a roof and be at least 50% above ground.)
- Disaster assistance for property restoration is usually a loan, not a grant. The average monthly payment on a $50,000 disaster loan is about twice the average annual premium for $50,000 of flood insurance coverage.
Check with your insurance agent for the most up-to-date information on flood insurance coverage specifications.
Be aware, also, of numerous changes to the National Flood Insurance Program brought about by the Biggert-Waters Reform Act, which became law in July, 2012. Premiums are increasing and most subsidized and grandfathered rating is beginning to be phased out over the 2013-2014 time frame. Information about the NFIP Reform is available on EDEN at http://eden.lsu.edu/Topics/Hazards/Floods/NFIP/Pages/NationalFloodInsurance(NFIP).aspx
For general information, see Flood Insurance (also available in Spanish)