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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 (1) “A general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties (at least one of which is your property) from a. overflow of inland or tidal waters; b. unusual and rapid accumulation or runoff of surface waters from any source; or c.mudflow*. (2) collapse or subsidence of land along the shore of a lake or similar body of water as a result of erosion or undermining caused by waves or currents of
water exceeding anticipated cyclical levels that result in a flood as defined in A.1.a. above. * Mudflow is defined (in part) 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 valued 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 it. If your homeowners insurance policy is a valued policy with a $200,000 limit of liability on the building, you would receive $200,000.Flood insurance pays 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 it costs $200,000 to rebuild it. 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 than the policy limit.
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 residential condominium association buildings. While the three forms are similar, they do contain some important differences. For example, the General Property Form does not provide coverage for contents in any building other than the insured building, and the Residential Condominium Building Association Policy Form 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.
About Flood Insurance CoverageBuilding versus Contents Coverage:
Flood insurance protects two types of insurable property: building and contents. The first covers your building, the latter covers your possessions; neither covers the land they occupy.
Building coverage includes:
- The insured building and its foundation
- The electrical and plumbing system
- Central air conditioning equipment, furnaces, and water heaters
- Refrigerators, cooking stoves, and built-in appliances such as dishwashers
- Permanently installed carpeting over unfinished flooring
Contents coverage includes:
- Clothing, furniture, and electronic equipment
- Portable and window air conditioners
- Portable microwaves and dishwashers
- Carpeting that is not already included in property coverage
- Clothing washers and dryers
What's Not Covered
- Damage caused by moisture, mildew, or mold that could have been avoided by the property
- Currency, precious metals, and valuable papers such as stock certificates.
- Property and belongings outside of an insured building such as trees, plants, wells, septic
systems, walks, decks, patios, fences, seawalls, hot tubs, and swimming pools.
- Living expenses such as temporary housing.
- Financial losses caused by business interruption or loss of use of insured property.
- Most self-propelled vehicles such as cars, including their parts (see Section IV.5 in your policy)
Flood Insurance for Basements and Areas Below the Lowest Elevated Floor
Coverage is limited in basements regardless of zone or date of construction. It's also limited in areas below the lowest elevated floor, depending on the flood zone and date of construction. These areas include:
- Crawlspaces under an elevated building.
- Enclosed areas beneath buildings elevated on full-story foundation walls that are sometimes
referred to as "walkout basements"
- Enclosed areas under other types of elevated buildings
The two most common reimbursement methods for flood claims are: Replacement Cost Value (RCV) and Actual Cash Value (ACV). The RCV is the cost to replace damaged property. It is reimbursable to owners of single-family, primary residences insured to within 80% of the building's replacement cost.
All other buildings and personal property (i.e. contents) are valued at ACV. The ACV is the RCV at the time of the loss minus physical depreciation. Personal property is always valued using the ACV.