What exactly does flood insurance cover?

Many people are confused by what exactly flood insurance is and what it covers. After Hurricane Katrina hit, many New Orleans homeowners were upset to find that their losses were not covered, either because they assumed their regular homeowner’s policy covered flooding (which it doesn’t – while private companies manage flood insurance , it is provided by the federal government as a separate policy) or they don’t understand exactly what the flood insurance policy they did have covered. So, what does flood insurance cover?

In the case of the Katrina victims, the problem was something called the anti-competitive causation clause. In simpler terms, this means that if your home was damaged by two different factors at the same time — in this case, both flood and wind — the flood damage is not covered. This in turn leads to the question of what exactly does flood insurance cover? When the sole cause of damage is flooding and the homeowner has proper coverage, his policy will cover several types of damage. The first category is structural loss. This includes damage to the building’s roof, walls, and foundation, as well as electrical, plumbing, air, and heating systems. This also includes permanent fixtures in the home, such as floors and some appliances. In some cases, the garage also falls under this category. The second category is the loss of personal property, including clothing, furniture, artwork (up to a limit of 2,500), rugs, stored food, and appliances not covered by structural damage. The third category is basement and crawl space losses. This is where it gets a little more complicated. Contrary to popular belief, at least parts of these areas are covered. Personal belongings, floors, cupboards and refrigerators are not covered. The structural aspects of a basement, as well as their mechanical systems, are generally covered.

Every flood policy has limits and exclusions. There is a limit of $250,000 for building loss and $100,000 for personal property loss. For those who want to get more coverage, you should look into private flood insurance. While this is available, it is pricey and generally only available to homeowners living in low-risk areas. For them, the question of what flood insurance covers can be answered slightly differently. Federal flood policy exclusions include money, currencies and stock certificates. They also include anything but a garage that is outside the building, such as cars, outbuildings, landscaping, and swimming pools.