Wherever you live, it’s important to protect your home and your assets by having flood insurance.
Debunking the three myths of flood insurance.
There are three major myths floating around about flood insurance, and if you buy into these myths, you could be taking an unnecessary risk. These myths are that coverage is only needed for people in flood zones, that home insurance covers flooding, and that government programs take care of flood coverage. We’ll debunk these myths so you can understand the full extent of flood coverage and how it actually works.
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Fire
Risk Factor
Most fires are devastating. Besides the emotional impact, the physical damage to your home can be significant. If you lost your home to fire, do you have adequate insurance to replace your home and its contents? Remember, inflation rates on building materials and construction costs rarely track with real estate values. As a result, rebuilding a home can often cost significantly more than expected.
Solution
Make sure your homeowners policy contains replacement cost coverage with no cap. This protects you if the cost to reconstruct your home is higher than your current limit of coverage. And, be sure that your insurance includes rebuilding your home to code. Very often, local ordinances and building codes change over time, which may require additional costs.
Personal Property / Contents - Property Damage
Risk Factor
When your home suffers damage due to an unexpected event, your personal property is also at risk. Furniture, appliances, clothing, electronics, and other personal items can also be damaged or destroyed.
Solution
Your homeowners insurance policy typically covers personal property, including the contents of your home and other personal items owned by you or family members who live with you. Make sure your homeowners policy includes replacement cost coverage for personal property so that you always receive the full cost to replace whatever item is damaged.
Additional Living Expense / Loss of Use
Risk Factor
When there is substantial damage to your home due to unexpected events such as lightning, fire, or a storm, you may not be able to live in your home until it can be repaired or rebuilt–potentially incurring additional living expenses for lodging, food, and other daily needs.
Solution
Ensure that your homeowners insurance policy provides additional living expense or loss of use coverage to compensate you for the additional costs you incur for reasonable housing and living expenses if a covered event makes your house temporarily uninhabitable while it's being repaired or rebuilt.
Valuable Possessions
Risk Factor
Typically, there is a sublimit on homeowner insurance policies for valuable possessions, such as jewelry, furs, fine arts, and other collectibles.
Solution
Obtain a personal floater or schedule your valuable possessions to ensure you’ll have the money to replace them.
Medical Expenses
Risk Factor
If a guest is injured while on your property, even when it’s due to a friendly game of baseball, you may be required to pay any medical expenses associated with their injury.
Solution
Your homeowners policy should include medical expenses coverage to take care of injuries and treatment - generally not of a serious nature. In the event a person is injured on your property and requires medical attention, you would be able to submit the injury-related medical expenses to your insurance carrier. Medical expenses are usually paid without a liability claim being filed against you.
Personal Liability
Risk Factor
In the unfortunate event that someone slips and falls while on your property, you and your family may be held liable for any injuries that result.
Solution
Your homeowners policy includes personal liability coverage to respond to incidents where injuries or damages occur to a third party where you may be deemed negligent. However, you should consider purchasing a personal umbrella or excess liability policy to provide additional coverage limits to protect your assets in case a lawsuit is brought against you.
Miscellaneous Coverage
Risk Factor
The fun that comes with having a trampoline in your backyard can also be accompanied by serious risks, which may not be covered under your standard homeowners insurance policy since coverage varies from state to state and between insurance companies.
Solution
You should make sure your homeowners insurance policy covers your trampoline, as many insurance providers refuse to take on trampoline liability and exclude the item from coverage.
Personal Injury / Defamation
Risk Factor
Young people are usually very active online. However, using social media and other sites can increase the possibility of them directly or indirectly damaging someone's reputation and exposing you, the parent, to a lawsuit.
Solution
Your homeowners insurance policy includes liability coverage for property damage caused by any member in the family, but likely does not cover rumors or statements that damage a reputation. You may need to seek additional coverage to include liability protection that covers personal injury or defamation.
Umbrella / Excess Liability Coverage
Risk Factor
You invite guests over for a pool party and one of your guests dives into the shallow end of the pool and is permanently injured. They hire a lawyer to represent them and after a long legal battle, you and your family are left financially responsible for their injuries. Do you have enough money in savings to cover your legal responsibilities as well as the legal defense costs?
Solution
An umbrella or excess liability policy increases your personal liability limits by adding protection over and above your current auto, boat, or homeowners policies-providing financial value and security. Excess liability insurance is available either by an endorsement to your homeowners policy or available as separate coverage.
Flood Coverage
Risk Factor
You do not have to live near a body of water to suffer loss due to flooding. With the changing weather patterns and more damaging storms occurring around the globe, flood losses are becoming more common in places that are not normally prone to flood damage. Your homeowners policy does not cover damage from flood. Could your home be at risk?
Solution
Purchase a flood insurance policy to protect your home and covered contents from certain types of flood losses as designated by the National Flood Insurance Program. A flood policy is purchased as a separate policy through the federal program (NFIP) or through a servicing carrier known as a write your own carrier.
Secondary Home
Risk Factor
Owning a secondary home has the potential of increasing your liability exposures.
Solution
Be certain that you extend the liability coverage under your homeowners policy to include your secondary home. You should also consider including the secondary home under an excess liability or umbrella policy to provide for additional liability limits.
Collector Cars
Risk Factor
Collector or classic vehicles often have significant value and require special documentation and unique insurance coverage to ensure they are adequately protected. Even if stored on your property, they are typically not covered under your homeowners insurance.
Solution
Insure your collector cars with a specialized insurance company that focuses on and understands the unique nature of collector or classic cars and other vehicles.
Wine Collection
Risk Factor
If you are a connoisseur of wine, you know that it is susceptible to outside environmental exposures that can ruin it. If the collection is damaged, coverage from your homeowners policy is a possible recourse. However, the damage is only insurable if it is a covered cause of loss as outlined in your homeowners policy. A deductible would also apply.
Solution
If you have a sizable wine collection, you may want to consider scheduling the collection on your homeowners policy. Doing so expands your coverage and eliminates the deductible in case of a loss. You can also consider unique coverages for wine, such as for spoilage.
Water Damage
Risk Factor
Whether entering from outside your home from a flood or from within your home’s plumbing system, water damage is the most common cause of loss to a home. Many policies exclude losses caused by backup of sewers and drains, and all unendorsed homeowner policies exclude damage caused by a flood.
Solution
Careful review is essential to protect your home and belongings from all sources of water damage. We recommend coverage solutions from insurance companies that include backup of sewers and drains. Also, identify cost efficient solutions to address the risk of flood damage in the first place.
Off-Premises Theft
Risk Factor
Surprisingly, standard auto insurance does not cover personal property or contents stolen from your car.
Solution
Most homeowners policies offer an option to include off-premises theft coverage as an endorsement, which covers you for theft of your personal property away from your residence.
Flooding is a risk no matter where you live.
The first myth is that insurance is only needed for people living in designated flood zones. In reality, flooding is a potential risk everywhere and the damage can be devastating. Just because you don’t live in a high flood risk area doesn’t mean it’ll never happen to you. You need specialized insurance coverage to help protect your home from rising waters—even if you’re not in a flood zone.
Home insurance doesn’t typically cover flood damage.
Another myth is that home insurance automatically includes flood coverage. In reality, that is usually not the norm, and you should always assume you aren’t covered unless your home insurance policy specifically says otherwise. If it does not include coverage for floods, you’ll need to get a separate flood insurance policy to help protect your home from the unexpected.
Few homes are covered by government programs.
The third myth is that government programs have taken care of damages caused by flooding. There is a National Flood Insurance Program that guarantees the availability of insurance in specific areas. However, this only covers a small percentage of homes. If you do not have coverage through a government program, you’ll need to find a policy that fits your needs.
What is considered a flood?
The specifics of what’s covered may vary depending on your policy, but for the most part, flood policies may cover losses from floods caused by rainstorms, snowmelt, storm drainage systems, and dam failures.
What is the cost of flood insurance?
Costs for your flood policy may depend on the amount of risk for flooding in the area where your home is.
The difference between having and not having a flood policy.
For most homeowners, floods are a low likelihood but high-cost risk. If you are hit by flooding you could lose most of your personal possessions, face major reconstruction work, or even be left homeless for months while your property is made habitable again. In most cases, not having coverage for flooding is a chance you simply can’t afford to take. There are many factors that go into tailoring a policy for your home, so it’s important to understand the reality of insurance and why it’s important to have it.
Do you need flood insurance for your home? Contact us to go over the benefits of obtaining a separate policy to fill in the gaps of your home insurance policy.
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