Flood Insurance Coverage

A flood may be caused due to various reasons such as rainfall, storm, landslides, tides or even a tsunami.  When water inundates a person’s home or place of business, he suffers a loss.  If he has taken an insurance policy with appropriate flood insurance coverage, he would be indemnified by the insurance company for the damage caused.

Flood Insurance Coverage

Insurers of flood insurance policies generally provide the options of ‘buildings coverage’, ‘contents coverage’ and ‘preferred risk coverage’.

  • Buildings Coverage

When a person who has taken a flood insurance policy opts for ‘buildings coverage’, he is provided with protection from damage caused to the building structure, whether it is his place of business or residence.  This flood insurance coverage will also include certain items which are considered as part of the building such as central air conditioning units, built in dishwashers or microwave ovens, hot water heaters, garbage disposal units, permanently installed items such as cabinets, elevator equipment and lighting and plumbing fixtures.  Certain items in the basement may also be covered. Residential as well as commercial buildings can be insured under this coverage up to specific limits.

  • Contents Coverage

Often, it is not the building that is damaged by floods but the contents of the building.  A sudden flood would hardly affect the building but would surely damage its contents.  By taking a flood insurance policy with ‘contents coverage’, the insured’s personal belongings like clothes, furniture, portable air conditioners can be covered under the policy and he would be compensated if there is a loss due to floods. 

  • Preferred risk Flood Insurance Coverage

Though flood insurance is usually taken by people living in flood prone areas, even those living in regions with low to moderate risk of flooding can purchase flood insurance.  Since the chance of claims arising from them is low, insurance companies provide them preferred risk flood insurance coverage.  The premium to be paid would be lower than that of standard flood insurance policies.  Both buildings coverage and contents coverage is provided.  Replacement cost coverage is also available subject to certain conditions.

Payment of Flood Insurance Claims

When the insured files a flood insurance claim with the insurance company, it will first investigate the cause of damage to ascertain that the loss has been indeed caused by flood.  The extent of loss would then be calculated based on the flood insurance coverage taken.  If the claim is genuine and reasonable, the insurer will pay the claim amount.

Selecting an Appropriate Flood Insurance Policy

One can buy flood insurance policy from a particular insurer after studying the rates for different kinds of flood insurance coverage.  This information can be obtained from individual insurers and is a time consuming task. The person wanting to take flood insurance would then have to compare the rates.  A better method may be to contact an insurance agent or broker who would have ready information and can provide rate comparisons for each kind of flood insurance coverage.

The best and the most convenient way of selecting a suitable flood insurance policy would be to visit a web site which can provide comparative data.  The person interested in taking flood insurance has to enter certain details - the amount of insurance, the flood insurance coverage, the degree of flood risk and so on.  He would then get rates offered by various insurers and he can select the insurance policy which offers the best terms.

Though one may not be able to prevent a natural hazard like a flood, one can take the necessary precautions to protect oneself from loss due to property damage.  All that one has to do is buy flood insurance and the insurance company will indemnify the loss amount within the maximum flood insurance coverage limits.