Buyers of waterfront homes typically build extra insurance costs into their home-buying budget, but flooding can occur far from the water’s edge. In addition, researchers are noticing a trend toward more intense or more frequent floods in many locations because of climate change.
Environmental Protection Agency researchers found that floods are at least five times more common now than in the 1950s in more than half of the coastal locations studied.
While maps created by the Federal Emergency Management Agency are commonly referenced to determine whether flood insurance is required for a specific property, some homeowners may want to consider getting insurance coverage even if their home isn’t in a flood zone. We asked John Dickson, president and CEO of Aon Edge, a private flood insurance provider, to explain how homeowners can determine the necessity of flood insurance. He responded to the following questions via email.
Q: How do homeowners and buyers evaluate their risk of a flood? Is it just based on FEMA maps or are there other methods?
Dickson: Previously, homeowners and buyers were basically limited to using the FEMA flood insurance rate maps to assess flood risks. Those maps are maintained regionally and are not consistently updated. Today, multiple tools exist to help homeowners and buyers better understand flood risk. Those applications include high resolution, digitized maps and probabilistic models that simulate thousands of flood events. These tools allow us to better visualize and quantify flood exposure. In many instances, these tools are translated to a “flood score,” which help consumers understand risk relativity. In most situations, the best first step is to have a conversation with an insurance agent and specifically ask about the tools available to better understand risk of flooding. Better mapping coupled with powerful computer simulations provides an opportunity to better understand exposure to all types of floods.
Q: What can homeowners do to protect themselves from damaging floods? Are there home improvements that can be made to reduce the risk?
Dickson: Continued innovation and investment in building practices and construction materials afford consumers with many options to mitigate the impacts of floods. The most basic technique that is frequently the most effective consists of elevating. While expensive, sufficient elevation can operate as complete mitigation. Other less-involved technology includes wallboard made from plastic rather than gypsum, smart vents that allow water to flow through a structure rather than push against it, and humidity sensors that can detect water levels while the property is vacant. With proper elevation, thoughtful site selection and flood-mindful materials, properties can be built to better withstand and recover from floods.
Q: Please explain how flood insurance works — can you buy it from your home insurance company or is it a separate policy?
Dickson: Previously, the National Flood Insurance Program (NFIP) administered by FEMA was the only source for flood insurance. That program offered only a stand-alone, separate policy to insure against the risk of flooding. Today, multiple options exist — consumers can still purchase a separate policy from the NFIP or explore several options from the private market. Private flood insurance options include stand-alone options similar to that offered by the NFIP or endorsement coverage that attaches to a homeowner’s policy. Private markets also offer excess coverage that offers limits above those available from the NFIP, helping consumers better protect pricier real estate investments.
Q: What types of water damage are covered by a regular home insurance policy and what types are not?
Dickson: Generally, inundation is not covered by traditional homeowner’s insurance. This typically refers to where two or more properties or two or more acres of land are inundated by water. These events can result from rainfall, storm surge, surface water, flash floods or snow melt. Conversely, many homeowner’s policies cover water events that generally start inside the covered residence, including damage from burst pipes or sewer backup. For coastal locations, the line between flood insurance and homeowner’s insurance becomes more complicated due to the combination of wind and water damage resulting from tropical cyclones. Flood insurance generally does not cover wind-driven water but does cover water pushed ashore over the ground. It is also worth noting that flood insurance typically covers mudslide exposure while homeowners may insure against landslides.
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