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Exposing Flood Insurance Pitfalls

So you’ve bitten the bullet and spent beau coups bucks on flood insurance.  The premium made your eyes cross but at least there is nothing that the Mother Nature’s garden hose can do to hurt you from a financial standpoint, right?  Darn, I hate it when I’m the guy who delivers bad news but the truth is there are 5 major flood insurance pitfalls that you need to know.


Floods are one of the scariest experiences that anyone can endure.  Knowing how you’re covered, and how you aren’t, will make a big difference in how you come through the storm.

1- If the Rains Come Within 30 Days of the Purchase of Your Policy:  Flood insurance policies have a 30-day waiting period. So, if you haven’t bought coverage already, you’ll just have to hope that what’s happening outside right now isn’t a rain storm of Biblical proportion.

Slash Your Home Insurance Premiums. Search for Lower Rates There is an exception to the 30-day rule.  You’re in luck if the policy is issued as part of a lender requirement for a new mortgage or home refinancing.  In those cases, the new policy connected with the lender requirement is effective at the time of the loan closing.  Remember, though, this only applies if it’s a lender requirement.

2- If Your Building Losses Exceed a Quarter Million Dollars:  A standard home insurance policy does not cover floods, but you have the option of buying federally backed flood insurance if your community participates in the National Flood Insurance Program (NFIP), which is administered by the Federal Emergency Management Agency (FEMA).  However, under NFIP, “Building property coverage is capped at $250,000, says Rachel Racusen, a spokeswoman for FEMA.  Ms. Racusen goes on to say, “Likewise, NFIP has a limit of $100,000 in coverage for the contents of a home.

If your house or the property in it is valued at more than those limits, you could be at risk of being underinsured.

3-  If You Have Made Improvements to Your Basement:  The building property coverage part of flood insurance covers some portions of a basement from flood damage, such as foundation walls, drywall for walls and ceilings, furnaces and hot water heaters.  However, flood insurance does not cover cosmetic improvements to basements. So if storm-related flooding damages new furniture or carpeting, it will not be covered. Neither will damage to things like new sinks or bathtubs. In the event of a flood, a standard homeowner’s insurance policy won’t cover those damages either, so you likely will have to pay out of pocket to replace them.

4- If You Experience Damage to Special Landscaping:  You placed your collection of dwarf bonzai trees in a way to capture the true external feng shui that you were seeking.  Along comes a flood.  Flood insurance covers damage to buildings, but it won’t pay for damage to surrounding areas.  That means plants, trees, shrubs and other items beyond the perimeter walls of a home are not insured.

5- If the Damage is to the Extent that You and Your Family Need Temporary Housing:  Pay close attention to this one, because it’s a pretty big deal!  If your home is uninhabitable after a storm or hurricane because of a flood loss, your policy generally won’t cover temporary housing expenses.  This means that your Mom was right when she told you to set aside money for a rainy day.  In a case of total or near total loss you will need to find, and pay for, a place to stay.