The recent storms have shaken many of us and once again brought the topic of flood insurance to the forefront. In the past I've discussed the need for a flood policy to protect your home and business from flood damage.. But like any insurance policy it is important to understand that even flood policies have their limitations. Lets take a quick look at what a flood policy is, a limitation that affects most midwesterners, and why a flood policy is still worth the premium in a total loss.
Flood policies are written by the NFIP (National Flood Insurance Program) which is overseen by FEMA. A flood as defined by the National Flood Insurance Act of 1968 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 from: a) Overflow of inland or tidal waters, b) Unusual or rapid accumulation of runoff or surface waters from any source, 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.
One area of a flood policy that often times catches mid-westerners off guard is how the FEMA controlled flood policies cover basements. Most of us have a basement. It's just part of midwestern living. As such a basement is defined as "any area of the building, including any sunken room or sunken portion of a room, having its floor below ground level (subgrade) on all sides." That means that a walkout basement is not considered a "basement" in the eyes of the flood policy, while a true subgrade basement is. If you have a flood policy and you have a true basement, your coverage is automatically limited to the following:
- Central air conditioners
- Cisterns and the water in them
- Drywall for walls and ceilings in a basement and the cost of labor to nail it, unfinished and unfloated and not taped to the framing.
- Electrical junction and circuit breaker boxes
- Electrical outlets and switches
- Elevators, dumbwaiters, and related equipment, except for related equipment installed below the base flood elevation after September 30, 1987
- Fuel tanks and the fuel in them
- Furnaces and hot water heaters
- Heat pumps
- Nonflammable insulation in basement
- Pumps and tanks used in solar energy systems
- Stairways and staircases attached to the building, not separated from it by elevated walkways;
- Sump pumps;
- Water softeners and the chemicals in them, water filters, and faucets installed as an integral part of the plumbing system;
- Well water tanks and pumps;
- Required utility connections for any item in this list
- Footings, foundations, posts, pilings, piers, or other foundation walls and anchorage systems required to support a building.
If you have elected to cover personal property, those items of property in a building enclosure below the lowest elevated floor, or a basement, is limited to the flowing items:
- Air conditioning units, portable or window type;
- Clothes washers and dryers; and
- Food freezers, other than walk-in, and food in any freezer.
As you can see coverage in a basement is very limited especially to personal property. This can come as a surprise at the time of a loss so be sure that you understand your flood policy and its purpose.
There is no such thing as an all encompassing insurance policy. They all come with their limitations and exclusions but that doesn't mean they don't serve a purpose. If your chief concern is protecting personal property being stored in a true basement, then a flood policy probably isn't worth the premium. However if your interest is protecting your home against
against a catastrophic event, a flood policy will replace the basic structure, the appliances, and then some.