This article is an excerpt. Download the NFIP Summary of Coverage to read the entire article.
This document was prepared by the National Flood Insurance Program (NFIP) to help you understand your flood insurance policy. It provides general information about deductibles, what is and is not covered by flood insurance, and how items are valued at the time of loss.
This Document is based on the Standard Flood Insurance Policy Dwelling Form, which is used to insure one to four family residential buildings and single family dwelling units in a condominium building. There are two other policy forms:
• The General Property Form is used to insure five or more family residential buildings and non-residential buildings.
• The Residential Condominium Building Association Policy Form is used to insure condominium association buildings.
While the three forms are similar in many ways, there are differences as well. For example, the General Property Form does not provide coverage for contents in any building other then the insured building, and the Residential Condominium Building Association Policy Association Policy Forum contains a coinsurance clause, which provides for a pro rata reduction in the building claim payment if the building is not insured to 80 percent of its replacement value.
Two Types of Flood Insurance Coverage
The NFIP’s Dwelling Form offers coverage for: 1. Building Property, up to $250,000, and 2. Personal Property (Contents), up to $100,000. The NFIP encourages people to purchase both types of coverage. Your mortgage company can require that your percentage a certain amount of flood insurance coverage.
For information about your specific limits of coverage and deductibles, refer to the Declarations Page in your flood insurance policy. It’s also a good idea to review your policy with your insurance agent or company representative.
What is a Flood?
Flood insurance covers direct physical loss caused by “flood.” In simple terms, a flood is an excess of water on land that is normally dry. Here’s the official definition used by the National Flood Insurance Program.
A Flood is “A general and temporary condition of partial or complete inundation of two or more properties (at least one of which is your property) from:
• Overflow of inland or tidal waters;
• Unusual and rapid accumulation of runoff of surface waters from any sources;
• Mudflow*; or
• Collapse or subsidence of land along the shore of a lake or similar body of water as a result of erosion or undermining causes by waves or currents of water exceeding anticipated cyclical levels that results in a flood as defined above.”
*Mudflow is defined as “A river of liquid and flowing mud on the surfaces of normally dry land areas, as when earth is carried by a current of water…”
Three Important Facts About Your Flood Policy
A Standard Flood Insurance Policy is a single-peril (flood) policy that pays for direct physical damage to your insured property up to the replacement cost or Actual Cash Value (ACV) (See “How Flood Damages Are Valued”) of the actual damages or the policy limit of liability, whichever is less.
1. Contents Coverage must be purchased separately.
2. It is not a value policy. A valued policy pays the limit of liability in the event of a total loss. For example: Your home is totally destroyed by a fire and it costs $150,000 to rebuild. If your homeowners insurance policy is a valued policy with a $200,000 limit of liability. Flood insurance pays just the replacement cost or ACV of actual damages, up to the policy limit.
3. It is not a guaranteed replacement cost policy. A guaranteed replacement cost policy pays the cost to rebuild your home regardless of the limit of liability. For example: Your home is totally destroyed by a fire and costs $200,000 to rebuild. If your homeowners insurance policy is a guaranteed replacement cost policy with a $150,000 limit of liability on the building, you would receive $200,000. Flood insurance does not pay more then the policy limit.
To find out more, download the NFIP Summary of Coverage pdf.