Wondering how flood insurance actually works, what it covers, and what it costs? Perhaps you’re not even convinced that you need it.
But, hurricane season is nothing to laugh at in Texas. So getting flood insurance should at least be on your radar if you don’t already have it. To get the real deal on how flood insurance can help safeguard your precious property, we sat down with Ken Robinson, who services all of Texas as CEO of MAKZ Insurance.
Ken drops some excellent and little-known insights for everyone: no matter if you’re a brand new homeowner, a renter, or if you’re simply considering flood insurance for the first time.
How Do Insurance Companies Define a Flood Event?
In very elementary terms: insurance policies shell out money when bad things happen. Naturally, those horrible events must have definitions so insurers know when to pay. If this event doesn’t fit the definition, then your property is not covered under that specific policy.
Flood insurance isn’t any different. According to Ken, companies define a flood as whenever water comes from outside of your home, into your home. So if this happens to you and you have flood insurance, you’re much better off. Your damaged home is generally covered.
Do I Really Need Flood Insurance?
“I recommend definitely everyone should get flood insurance. I know there are a lot of rumors… that every part of Houston is not a flood zone…As long as you’re living in the city, you should definitely have flood insurance. At any time, it just takes one heavy rainstorm, and you’re flooded.”
To understand why flood insurance is beneficial—especially in a Gulf state or coastal city—let’s backtrack to what home insurance does and does not cover.
Standard homeowner’s insurance policies cover 3 key things:
- The building structure
- Liability (if someone gets hurt/injured on your property)
Your personal property is covered if you have an endorsement (And, you should absolutely inventory your things… it’s easy to do when you move). To be clear: flooding is not covered under homeowner’s insurance!
What Flood Insurance Does and Does Not Cover
“You must have flood insurance in order to get coverage. Your homeowner’s policy does not cover flood insurance at all.”
Flood insurance is different from homeowner’s insurance since it covers:
- More than a standard homeowner’s insurance or renters policy
- Building structure if it’s damaged by water from outside your home
- *Optional add-on: Personal property (clothes, electronics, appliances, etc.)
While it’s optional, Ken recommends that everyone gets the personal property add-on in case of a flood, and ask questions about the type of coverage you’re getting.
There are two ways that insurance companies pay out on personal property claims:
- Some calculate the value by using replacement cost (this is the cost of replacing your items at the same price/with the same materials).
- Other companies use actual cash value to reimburse your damaged property.
The value of items like shoes and clothing will be harder to verify—since regular wear and tear diminishes them over the years. Ken recommends making an inventory of your belongings right away in order to have proof in case they are damaged.
A perfect time to do a home inventory is before you move! Try it by doing any of the following:
- Filming a video journal
- Taking pictures and scanning receipts with a phone app
- Making an online spreadsheet or notebook as you shop
If you want coverage for items that are damaged by water coming into your residence from outside, you absolutely must have flood insurance. Ideally, you could do this through a personal property add-on. Don’t have it? You’re on the hook for your own repairs and item replacements.
What Are My Options for Flood Insurance?
“I recommend that everyone get a private flood program quote and a National Flood Program [NFIP] quote.”
There are two main ways to get flood insurance and they’re all quoted annually:
- FEMA National Flood Insurance Program (NFIP)– a standard policy where holders pay the same rate statewide as determined by FEMA
- Private flood insurance programs- policy is based off a private insurer’s systems; lenders must approve these programs, but pricing is becoming competitive
Note for homeowners: Consult your mortgage company first, as some lenders don’t accept flood insurance policies from private companies. If you own your home outright, it’s your decision.
What Are the Waiting Periods for Flood Insurance?
Here in the Gulf, hurricane season arrives in late spring or early summer like clockwork.
So, if you live in any of the Gulf states prone to hurricanes or flooding, get your flood insurance a month before then.
For areas at risk during inclement weather, it’s crucial not to procrastinate about getting a flood policy if you want to be covered soon.
For NFIP policies:
There is a 30-day waiting period before flood policies kick in. Any flooding that happens within this time will not be covered by your flood insurance or homeowner’s insurance. The only exception? If you’re moving into a newly-purchased home. (This is to avoid having to pay out too many claims at once, which would put the insurers themselves in dire financial straits).
For private insurance policies:
Ken acknowledges there’s a lot more flexibility with private flood insurers. Although you’re limited to getting the mortgage company’s approval on a private flood policy, the waiting period is drastically different. It takes anywhere from 15-, 10-, or even 0-day waiting periods for your property to get flood coverage with a private company.
How Much Does Flood Insurance Cost per Year?
You really can’t put a price on knowing you’ll be taken care of if your property gets flooded… Generally speaking, flood insurance costs will vary based on different factors, like:
- Location of your home
- Cost and size of your home (this determines how much coverage you need)
- Replacement cost of your home (should be at least equal to your home’s appraisal value)
Through the NFIP, this policy is paid out first. The maximum coverage limit is $250,000, regardless of the cost of your home.
For example, if your home costs $500,000, your NFIP flood policy only covers half in case of a flood (possibly less if your home’s appraisal value has increased). In this case, Ken recommends getting an excess policy for flooding to cover the additional $250,000 the home is worth.
Do I Need Flood Insurance if I Live In a Condo or Rent an Apartment?
“Be it renting or owning, you want to have some type of insurance in place. Even in the instance of renting, you still need to make sure your personal property is covered.”
Do you even need flood insurance if you’re renting? Ken says yes.
Remember that 3-point list of what homeowner’s insurance covers? The same thing applies if you get a renter’s policy (for renting houses or apartments) or a condominium policy (for owning a condo). Again, you’ll need a flood insurance policy to get any coverage for water that comes into your residence from outside and causes damages.
The chances of experiencing flood damage from anything higher than the first floor are quite slim. Therefore, Ken recommends that residents who live on first-floor units get insurance against floods.
How Do I Know if I’m Buying or Renting in a Flood Zone?
“When you’re speaking with your realtor, that realtor should have that information. There are sites online where you can enter your information to determine if you’re in a flood zone.”
Like many Texas-based insurers, Ken prefers to use the terms high-risk and low-risk when referring to flood zones.
Due to the state’s position near a coast known for hurricanes and sudden, heavy rainfall, he firmly believes the entire city could be endangered by unexpected floods at any time.
If you’re about to move, it’s important to ask your realtor or leasing agent about its flood history first. Some questions before renting to ask include:
- Is this property in a flood zone?
- Do you know if it’s in an A-, E-, or X-zone?
- Has this property experienced flooding before?
- Do you have proof of a flood zone certificate?
Remember, if you’re renting in a first-floor unit in a higher-risk area (even if it’s never flooded before), you’ll likely want to consider flood insurance.
Mortgage companies require that you insure high-risk properties in certain zones with a flood policy before they greenlight your loan. If the property is in a known or risky area for flooding, then the mortgage company will definitely know. You don’t really need to investigate further, in this case.
Here’s a simplified way to remember how mortgage companies judge the flood risk of a home:
- A or B or E zone = higher-risk
- X zone = lower-risk
If your mortgage company says your house is in a flood zone, here’s what happens:
- The mortgage company will send a surveyor to inspect the property
- A surveyor will provide a flood certificate
- The flood certificate will include the designated risk level
How to Check If Your Address Is In a Flood Zone
Flood zones can come and go, (or get worse). When remapping of flood zones occurs, mortgages make sure you’re notified if your property is identified as having a newly changed risk for flooding.
You should receive a letter in the mail informing you if you’re in a higher-risk flood zone. This will also tell you if you’re required to get insurance. To check an address, click over to the National Oceanic and Atmospheric Administration website below.
If the tool above shows that you’re in a high-risk flood zone, Ken recommends that you get a flood insurance policy as soon as possible.
Why New & Current Homeowners Need To Check Their Flood Risk
“Unfortunately, with the last couple of floods that have happened over the last five years or so, some areas that were initially not in high-risk zones are now in those zones. When those homeowners bought those properties, they were in low-risk zones, but now they’re not. And in some areas that were in high-risk zones, I’ve been seeing some areas that have fallen into low-risk [zones]. So those areas have actually gotten credited for not flooding.”
It’s completely legal to sell property in a flood zone.
You can also build a home in a flood zone (although it might not be the wisest decision in a higher risk location).
As Ken points out, flood zones and their risk levels can change in as little as five years!
That’s why it’s crucial to verify the flood risk for wherever you live.
Do it for the sake of either protecting your home and belongings or to possibly save money on your home insurance.
Can I Reduce or Remove Flood Insurance Requirements?
“Increase, yes: flood insurers always want you to have adequate amounts of coverage. Decrease? If there is a mortgage on it, no, they won’t allow you to do that because that loan is still being covered.”
There is one caveat if you own your home. Although Ken doesn’t recommend it since it exposes you to a huge risk, you do have the right to decrease your level of flood insurance coverage if you feel it’s necessary. Avoid doing this simply to save money, or you could end up having to pay out-of-pocket costs if your property sustains flood damage.
Why are we covering topics like property insurance? It’s simple: We want to make sure anyone who’s moving is happy and successful—even if our movers haven’t personally helped you, even if you're already in your dream home. Your personal property should always be insured against damages or potential loss.