Flooding is one of the most common and devastating natural disasters. It can occur anywhere, even in areas not typically prone to floods. Due to climate change and other factors, there has been a significant increase in flooding in all areas of the country causing billions of dollars of damage, causing significant disruptions in people’s lives and causing enormous financial strain to repair the damage. And, despite this exposure to loss, many homeowners underestimate the risk of flooding and neglect to protect themselves. Below we will review in more detail the risk of flood, why flood coverage is necessary and what options are available.
Floods can be caused by a variety of factors, including heavy rainfall, storm surges, and snowmelt. Climate change has exacerbated the frequency and severity of these events, making previously “safe areas” not in a defined flood zone also vulnerable to flooding. According to the Federal Emergency Management Agency (FEMA), over 20% of flood claims come from properties outside high-risk flood zones. This statistic highlights the unpredictability of flood events and the necessity for homeowners to be prepared.
Most people consider their home as their most valuable asset. Yet many do not realize that the most important part of their financial portfolio is left vulnerable to flood loss, as standard homeowners insurance policies typically do not cover flood damage. Without flood coverage, homeowners are left to bear the full cost of repairs from flood damage, which can be costly. Flood damage can destroy foundations, electrical systems, and personal belongings, leading to repair bills that reach tens of thousands of dollars or more. This type of insurance provides a financial safety net, covering the costs of rebuilding and replacing damaged items.
Some homeowners might assume that federal disaster assistance will cover their losses in the event of a flood. However, federal aid is often insufficient and not guaranteed. It usually comes in the form of low-interest loans that must be repaid, adding a financial burden rather than alleviating it. Flood insurance, on the other hand, provides a direct payout for covered losses, helping homeowners recover more quickly and completely.
For properties located in high-risk flood zones, lenders typically require flood insurance as a condition for approving a mortgage. This requirement protects both the lender and the homeowner by ensuring there are funds available to repair flood damage. Even if not required, obtaining this coverage is a prudent decision to protect one’s investment.
Beyond the financial aspects, flood insurance provides peace of mind. Knowing that your home and belongings are protected allows homeowners to focus on safety and recovery during a flood event. It eliminates the uncertainty and stress associated with potential financial ruin, enabling a quicker and more assured recovery process.
The National Flood Insurance Program or NFIP, managed by FEMA, plays a crucial role in providing flood insurance to homeowners. Homeowners can purchase the NFIP insurance policy through an insurance agent or broker. Here are key features of the NFIP:
In addition to the NFIP, private flood insurance options are available. Private insurers offer policies that can be tailored to specific needs and often provide higher coverage limits than the NFIP. Here are some advantages of this type of insurance:
As climate change and other factors continue to increase the risk of flooding in all areas, the importance of having adequate coverage cannot be overstated. Homeowners should assess their flood risk and consider investing in flood coverage to protect their homes, their belongings, and their financial future. With options available through the NFIP and private insurers, homeowners can find policies that suit their needs and budgets.
To find out more about protecting your home against the risk of flood as well as making sure you have a comprehensive personal risk management and insurance program, please contact WTW Personal Lines for more information.
Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed subsidiaries of Willis North America Inc., including Willis Towers Watson Northeast Inc. (in the United States) and Willis Canada, Inc.
