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Home > Consumers > Flood > Myths and misconceptions
Myths and misconceptions
Myths

Myth: Only those people living in a flood plain need to be concerned about flooding.

It is a common misconception that people living in a designated flood plain are the only ones who need to worry about flooding. Recent experience in North Dakota has taught us that locations outside the flood plain are susceptible to flooding, in particular, flash flooding.

Myth: If I have direct flood damage to my home my homeowner's policy will cover me.

The standard homeowner insurance policy language clearly indicates that flood is excluded. The unpredictability and severity of flood events is so significant that regular insurance companies are unable and unwilling to provide coverage for flood. It is noteworthy that sewer and sump pump failure, as well as underground seepage, are also excluded. However, many insurance companies have elected to offer the ability to buy an endorsement with a limited amount of coverage for sewer or sump system failure

Myth: If I have a sewer or sump pump endorsement to my policy I will be covered in the event of a flood.

A sewer or sump pump endorsement on your policy does not mean you have coverage for flood. Most companies make it clear that they still do not cover flood damage only sewer damage. Some companies make it clear if flood is the cause directly or indirectly of the sewer or sump pump failure they will not cover any of the damage. Purchasing a sewer or sump pump endorsement should not be viewed as a purchase of flood insurance.

Myth: Since my mortgage company does not require me to have flood insurance I shouldn't have to worry about flooding.

Mortgage companies that issue federally regulated mortgage loans by law must require borrowers whose property is in a designated flood zone (Special Flood Hazard Area) to carry National Flood Insurance. However, loans that are not regulated by a federal program do not have this requirement. Further, experience has shown that not all mortgage companies have complied with this requirement and may not have required insurance when they should have. Since flooding can occur in areas other then just the designated flood zone, a consumer should avoid this false assumption.

Myth: We experienced a once in a 500 year flood in 1997 so I shouldn't have to worry about flood again during my lifetime.

The use of the terms "100 year floodplain" or "500 year floodplain" have created a false sense of security in the public. If your are in a 100 year floodplain it means that every year you have 1% chance that it will flood. So in the case where a flood event of a 500 year proportion occurred in 1997 it doesn't mean we will not have another flood of this magnitude for another 500 years. If conditions were right, i.e. ground saturation, snowpack, timing and duration of the spring thaw, storms, ice jams, etc., an occurrence of that magnitude could happen again.

Myth: You can't buy flood insurance if you are located in a high flood-risk area.

You can buy National Flood Insurance no matter where you live if your community participates in the NFIP (except in the Coastal Barrier Resources System areas). The program was created in 1968 to provide flood insurance to people who live in areas with greatest risk of flooding called Special Flood Hazard Areas (SFHA). In fact, lenders providing a federally-regulated mortgage loan must require borrowers in the SFHA to purchase flood insurance.

Myth: You can't buy flood insurance immediately before or during a flood.

You can purchase flood coverage at any time. However, for most applicants there is a 30-day waiting period after you've applied and paid premium before the policy is effective. There are some exceptions to this waiting period requirement so it is recommended you discuss this with an agent to determine if you are eligible. The policy does not cover a "loss in progress," defined as a loss occurring as of 12:01 a.m. on the first day of the policy.

Myth: Homeowners insurance policies cover flooding.

Homeowner's policies do not cover direct physical loss caused by flood.

Myth: Flood insurance is only available for homeowners.

Flood insurance is available to protect homes, condominiums, apartments and nonresidential buildings, including commercial structures. Residential structures, including condominiums, may be insured to a maximum of $250,000 per unit. The limit for contents on residential building is $100,000, which is also available to renters. Commercial structures can be insured to a limit of $500,000 for the building and $500,000 for the contents.

Myth: You can't buy flood insurance if your property has been flooded.

You are still eligible to purchase flood insurance after your home, apartment or business has been flooded, provided that your community is participating in the NFIP.

Myth: Only residents of high-flood-risk zones need to insure their property.

Even if you live in an area that is not flood-prone, it is advisable to have flood insurance. Between 20 percent and 25 percent of the NFIP's claims come from outside high-flood-risk areas. The NFIP's Preferred Risk Policy, available for just over $100 per year, is designed for residential properties located in low to moderate-flood-risk zones.

Myth: National Flood Insurance can only be purchased through the NFIP directly.

NFIP flood insurance is sold through private insurance companies and agents, and is backed by the federal government.

Myth: The NFIP does not offer any type of basement coverage.

Yes it does. The NFIP defines a basement as any area of a building with a floor that is below ground level on all sides. While flood insurance does not cover basement improvements, such as finished walls, floors or ceilings, or personal belongings that may be kept in a basement, (ie; furniture or clothing), it does cover structural elements, essential equipment and other basic items normally located in a basement. Many of these items are covered under the building coverage, and some are covered under the contents coverage portion of the policy. The NFIP encourages people to purchase both building and contents coverage for the broadest protection.

Myth: Federal disaster assistance will pay for flood damage.

Before a community is eligible for disaster assistance, it must be declared a federal disaster area. Federal disaster assistance declarations are issued in less than 50 percent of flooding incidents. The premium for an NFIP policy averages little more than $300 a year, which is less expensive than interest on a federal disaster loan. Not all federal disaster aid in is the form of grants. Most of the aid is in the form of low interest rate loans that must be paid back. Furthermore, if you are uninsured and receive federal disaster assistance after a flood, you must purchase flood insurance to remain eligible for any future disaster relief.

Myth: The NFIP does not cover flooding resulting from hurricanes or the overflow of rivers or tidal waters.

The NFIP defines covered flooding as a general and temporary condition during which the surface of normally dry land is partially or completely inundated. Two properties in the area or two or more acres must be affected. Flooding can be caused by:
  • The overflow of inland or tidal waters.
  • The unusual and rapid accumulation or runoff of surface waters from any source, such as heavy rainfall, or mudslides, i.e., mudflows, caused by flooding, that could be described as a river of liquid and flowing mud and the collapse or destabilization of land along the shore of a lake or other body of water, resulting from erosion or the effect of waves, or water currents exceeding normal, cyclical levels.

Myth: Wind-driven rain is considered flooding.

No, it isn't. Rain entering through wind-damaged windows, doors or a hole in a wall or the roof, resulting in standing water or puddles, is considered windstorm (rather than flood) damage. National Flood Insurance only covers damage caused by the general condition of flooding typically caused by storm surge, wave wash, tidal waves or the overflow of any body of water over normally dry land areas. Buildings that sustain this type of damage usually have a watermark, showing how high the water rose before it subsided. The standard flood policy does not cover wind or hail damage.

The National Flood Insurance standard policy

Following is a brief summary of the Standard Flood Insurance Policy. The summary offers highlights of the policy and is not intended to be all inclusive. It should be noted that the SFIP was updated and revised with an effective date of December 31, 2000. If you need more detailed information contact an agent. For a copy of the policy and more information on the subject go to the NFIP web site.

Coverage A - Building property
Coverage for direct physical loss by or from flood to:
  • The dwelling or manufactured home at the described location
  • Additions and extensions to and in contact with the dwelling
  • A detached garage-limited to 10% of dwelling coverage
  • Materials and supplies to be used for construction, alteration or repair
  • Awnings and canopies
  • Blinds
  • Built-in dishwashers
  • Built-in microwave ovens
  • Carpet, permanently installed over unfinished flooring
  • Central air conditioners
  • Elevator equipment
  • Fire sprinkler systems
  • Walk-in freezers
  • Furnaces and radiators
  • Garbage disposal units
  • Hot water heaters, including solar water heaters
  • Light fixtures
  • Outdoor antennas and aerials fastened to buildings
  • Permanently installed cupboards, bookcases, cabinets, paneling and wallpaper
  • Plumbing fixtures
  • Pumps and machinery for operating pumps
  • Ranges, cooking stoves, and ovens
  • Refrigerators
  • Wall mirrors, permanently installed
Coverage A - Building property (basements only)

Only the following items are covered building property in a basement:
  • 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 that installed below base flood line
  • Fuel tanks and the fuel in them
  • Furnaces and hot water heaters
  • Heat pumps
  • Nonflammable insulation in a basement
  • Pumps and tanks used in solar energy systems
  • Stairways and attached to the building
  • Sump pumps
  • Water softners
  • 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
Coverage B - Personal property
Coverage for direct physical loss by or from flood to:
  • Personal property owned by you or your household members at the described location
  • At your option, the property owned by guests
  • Air conditioning units, portable or window type
  • Carpets, not permanently installed, over unfinished floors
  • Clothes washers and dryers
  • "Cook out" grills
  • Food freezers, other then walk-in, and food in any freezer
  • Portable microwave ovens and portable dishwashers
Coverage B - Personal property (basement only)

Only the following items are covered personal property in a basement:
  • Air conditioning units, portable or window type
  • Clothes washers and dryers
  • Food freezers, other than walk-in, and food in any freezer

Coverage C - Other coverages
  • Debris removal
  • Loss avoidance - $1,000 for sandbags, levees etc.
  • Property removed to safety - $1,000 for expenses
  • Condominuim Loss Assessments
Coverage D - Increased cost of compliance

A limit of $20,000 in addition to policy limits for elevation, floodproofing, relocation, or demolition as a result of state or local floodplain management program requirements following flood damage.

Section V - Exclusions

Coverage for sewer backup, sump pump failure and seepage (pressure) is excluded unless the proximate cause of the loss is flooding then coverage is provided.

Misconceptions

Flood insurance misconceptions: 8 facts you should know

By Barbara Marquand. Article provided by Insure.com.

If you don't think your home is at risk for flooding, think again.

People outside of high-risk flood areas receive one-third of disaster assistance for flooding and file more than 20 percent of flood insurance claims, the National Flood Insurance Program says. Floods happen in all 50 states -- not just hurricane-prone coastal areas -- and are the most common natural disaster in the United States.

"Maybe if you lived on top of a mountain along the Continental Divide, maybe then you wouldn't need flood insurance, but that's about the only place you don't need it," says J. Fletcher Willey Jr., president of The Willey Agency in Nags Head, N.C.

Yet flood insurance is one of the most misunderstood types of insurance coverage. Here are eight facts to clear up some of the most common misconceptions about coverage through the National Flood Insurance Program:

1. No flood coverage under home insurance
Many people still assume standard renters and home insurance covers floods, says Larry Case, executive vice president of the Missouri Association of Insurance Agents. But you must purchase a separate flood insurance policy to protect your home and belongings from flood damage.

Most flood insurance is provided through the National Flood Insurance Program, administered by the Federal Emergency Management Agency. You can buy federal flood insurance from companies and agents certified to sell it if your community participates in the National Flood Insurance Program.

2. Flood insurance has caps
The amount of coverage you can buy through the NFIP is capped at $250,000 for a home's structure and $100,000 for contents.

If you want more coverage, you have to buy excess flood insurance, which is sold by private insurance companies. The excess policy covers the cost of flood damage over and above the $250,000/$100,000 caps.

3. Coverage limited in basements
The distinctions can be tricky, so read the policy for details. Some structural elements in the basement are covered, such as central air conditioners, foundation walls, electrical outlets, furnaces and hot water heaters. However, carpeting and floor tile are not covered.

Some appliances in the basement are covered, such as washers and dryers, portable air conditioners and freezers. But refrigerators are not covered. Most personal belongings--including furniture, clothing and electronic equipment--are not covered when they're in the basement.

4. Building and contents insurance required
A standard home insurance policy automatically covers personal belongings up to a certain percentage of the home's insured value. With flood insurance, you must purchase contents coverage as well as building coverage to get both.

5. No additional living expenses provided
If your home is destroyed by fire, homeowner insurance pays for the cost to rent comparable living quarters until the house is rebuilt. But flood insurance does not include coverage for additional living expenses. You typically foot the bill to rent a place to live while your home is being repaired after a flood.

However, when the president of the United States issues a major disaster declaration and homes are uninhabitable, FEMA can help affected homeowners and renters with alternative living expenses, says Gina Cortez, a FEMA spokesperson. This assistance may last up to 18 months.

6. No replacement cost coverage for personal belongings
Unlike standard home insurance, which lets you purchase replacement cost coverage for personal belongings, flood insurance features only actual cash value coverage for possessions.

Replacement cost coverage reimburses you for the cost to buy a new item to replace a destroyed belonging. Actual cash value coverage takes depreciation into account and reimburses you for the value of the item at the time it was destroyed. So if a flood destroys your 3-year-old television, flood insurance reimburses you for the value of a used TV--not for the cost to buy a new one.

To qualify for replacement cost coverage to rebuild part of a destroyed building, the home must be your principal residence, and you must have insured it for at least 80 percent of the cost to rebuild or up to the $250,000 cap. Otherwise, reimbursement for rebuilding is based on the actual cash value.

7. Limited coverage on valuables
The coverage for valuables, such as furs and fine art, is limited to $2,500. Currency, precious metals and valuable papers, such as stock certificates, are not covered at all.

8. No flood coverage for hot tubs and swimming pools
Flood insurance doesn't cover property and belongings outside the home. That includes hot tubs, swimming pools, decks, patios, fences, landscaping, walks, wells and septic systems.

Likewise, flood insurance pays for removal of debris in or on the home's structure, but not in the yard, Willey says.

Finally, don't wait until water is lapping at the front door to purchase a policy. Flood insurance has a 30-day waiting period from the date of purchase until the time it goes into effect. The only exceptions are if you're buying additional insurance when renewing a policy or as a result of a map revision, or if a lender requires flood insurance for a home loan.

Find the original article here.

North Dakota Insurance Department
600 E. Boulevard Ave.
Bismarck, ND 58505-0320
Phone 701.328.2440
Toll free 800.247.0560
Fax 701.328.4880

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