The National Flood Insurance Program (NFIP) and some private insurance companies provide flood insurance that covers direct physical flood damage to buildings and belongings. This is important because the standard home insurance policy does not cover flooding. And while federal disaster aid may be available after some major floods, those who qualify are typically eligible for just a few thousand dollars and an SBA loan, which must be repaid with interest along with the mortgage loan. An NFIP or private flood insurance policy is more likely to make a property owner whole again in the event of major flood damage.

Flood Recovery - fans drying out hardwood floor
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The Essentials of Flood Insurance Coverage

What Does Flood Insurance Typically Cover?

Flood insurance covers direct physical damage to your building and contents caused by flooding.

This includes:

  • Building Coverage: This protects the physical structure of the home, including the foundation, electrical and plumbing systems, furnaces and water heaters, and detached garages.
  • Contents Coverage: This part of the policy covers personal property within the home, such as furniture, electronics, and clothing.

The NFIP has provided a short brochure with more information.

Please refer clients to a licensed insurance agent for questions about coverage limits and specifics which can vary between the NFIP and private insurance providers.

Exclusions in Flood Insurance Policies

Flood insurance policies have specific exclusions. For example, damage caused by a sewer backup is covered if the backup is a direct result of flooding. If the sewer backup is not caused directly by flooding, the damage is not covered. Please refer clients to a licensed insurance agent for any specific questions.

Flood Insurance Basics for Real Estate Professionals

Distinguishing Flood Insurance From Other Policies

Flood insurance is distinct from standard home or renter insurance policies, which typically do not cover flood-related damage. A separate flood insurance policy is required to cover flood damage.

  • General Homeowners and Renters Insurance: These policies usually cover a range of perils but exclude flood damage.
  • Flood Insurance: Specifically covers direct physical property damage due to flooding and is required for a federally insured mortgage in high-risk areas on FEMA flood maps.

While the NFIP provides a standardized option, private flood insurance may offer varying coverage types and limits. Please ask the client to consult a licensed insurance agent for specific differences.

Educating Your Clients on the Importance of Flood Coverage

Real estate professionals are not flood risk or insurance experts. However, there are many flood risk professionals such as certified floodplain managers and licensed surveyors/engineers who can offer property-specific flood risk assessments and can advise your client. Having a short list of flood risk professional contacts can add significant value for your clients.

Here are a few key flood facts:

  • According to FEMA, the risk of flooding is not limited to high-risk zones; wherever it rains, it can flood.
  • Standard home insurance policies do not cover flood damage and federal disaster aid is typically limited to a few thousand dollars and an SBA loan for those who qualify in major disaster areas.
  • A separate flood insurance policy is required to cover any flood-related damage and may be worth considering. Please consult an insurance agent.

By understanding the potential costs and benefits of flood insurance, homeowners can make informed decisions. Encourage clients to consult with insurance professionals who specialize in flood insurance so they can explore their coverage options.

The Key Features of Flood Insurance That Real Estate Agents Should Know

Unlike standard homeowners or renters insurance policies, flood insurance is designed specifically to cover the unique risks associated with flood events.

Key features of flood insurance include:

  • Coverage for Buildings and Contents: Flood insurance policies typically cover the physical structure of your home or business, as well as the contents within it.
  • Mandatory Purchase Requirement: In FEMA designated Special Flood Hazard Areas (SFHA), mortgage lenders will require homeowners to purchase flood insurance as a condition of their loan.
  • Availability Through NFIP and Private Insurers: Flood insurance can be obtained through the National Flood Insurance Program (NFIP), which is managed by FEMA, or through specialized private flood insurance companies that may offer more comprehensive or flexible options at lower cost.
The Key Features of Flood Insurance That Real Estate Agents Should Know

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How Can Real Estate Professionals Assess Floodplain Risk?

Real estate professionals are not flood risk experts. However, there are many licensed and trained professionals such as certified floodplain managers and licensed surveyors/engineers who can offer a property-specific assessment of the likelihood of flooding and advise clients accordingly. Having a short list of flood risk professional contacts can add significant value for many clients.

What Should Homeowners in FEMA Flood Zones Know About Flood Insurance?

Federal law requires flood insurance for a federally insured mortgage in high-risk flood zones on FEMA flood maps. If the building is in FEMA zone A or V, the lender will notify the client directly.

Help Your Clients Find Protection With Flood Insurance

Flood insurance is a crucial safety net for homeowners, particularly in high-risk flood zones. Real estate professionals can help their clients by guiding them through the complexities of flood insurance and offering contacts for licensed professionals who can assess potential risks to their homes. Ensuring clients are covered on this front will not only help them protect against potential flood damage, but it will also establish trust and confidence with their clients going forward.