Damage due to erosion from flooding is not covered in typical homeowner's insurance policies. To be protected against floods and erosion, you will need to purchase separate flood insurance, especially if you live in an area where erosion is a likely consequence of sudden flooding. Having this type of insurance may even be mandatory if you live in a high-risk area.
How Flood Erosion Insurance Works
Most private insurers do not offer their own flood protection insurance because of something called adverse selection. Adverse selection means the insurance is only purchased by those that are at the highest risk of sustaining damage caused by a flood. This makes it more or less impossible for insurance companies to generate a profit--or even absorb their financial losses--by offering this coverage.
In response to the lack of insurance available for people in flood risk areas, the federal government created the National Flood Insurance Program (NFIP) in 1968. All standard flood insurance is provided by the NFIP. To make things easier, the Write Your Own program was established so private insurers could sell flood insurance to customers and give consumers a single point of contact for their homeowner's insurance needs.
Erosion coverage is a part of all NFIP insurance policies. There is nothing special you need to do or request to be covered for erosion caused by flooding.
What It Covers
Although the flood insurance offered by the NFIP covers losses due to erosion, the erosion must result from abnormally high waves, strong currents, tidal surge, severe storms, or flash flooding. Verifiable local weather reports are usually enough to prove the erosion was a result of one of these conditions.
Damage to residential buildings is covered up to $250,000 and another $100,000 for what's inside the structure. For nonresidential buildings, the coverage amount is up to $500,000 for both building and contents.
NFIP insurance policies cover basements and essential equipment traditionally located there, including furnaces and hot water heaters. Unfortunately, items often stored in a basement, including furniture and clothing, are not covered.
Coverage for the structure itself includes:
- Electrical system
- Plumbing system
- Major appliances
- Finished flooring & cabinets
- Detached garage
Contents that are covered include:
- Portable appliances
There are certain exclusions to coverage, including:
- Valuables worth more than $2,500
- External property additions, such as hot tubs or swimming pools
In addition to the above exclusions, you will also be responsible for any and all relocation costs, if necessary. Businesses are not reimbursed for losses that are a result of the inability to conduct day-to-day operations.
Who Should Purchase
Anyone who occupies a property as a homeowner, business owner, or renter qualifies for this flood erosion insurance. If you live in a community that is in a Special Flood Hazard Area and your home is financed through a government-regulated lender, it is mandatory to purchase flood insurance in addition to regular homeowner's insurance.
How to Obtain
You can purchase flood insurance through your regular homeowner's insurance agent or by contacting the NFIP directly through the organization's website or by calling 1-888-379-9531.
The average premiums for flood erosion insurance are about $700 per year but can vary depending on the area in which you live. You can get an estimate of what the premium will be by filling out the NFIP's flood risk profile, which is as simple as entering your address.
Get to Know Your Options
The first thing you'll want to do is talk to an NFIP representative or your homeowner's insurance agent to discuss whether flood erosion insurance would be beneficial for you. You'll also be provided with specific details about what will be covered, as well as how much the policy will cost. The NFIP offers several payment options, and your local insurance agent may offer others, as well. In general, however, the full amount of the yearly premium must be paid in order for coverage to be effective.