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6 flood insurance limitations you should know

By Barbara Marquand on October 18th, 2011

Floods are the most common natural disaster in the United States, yet many Americans don't understand how flood insurance works.

Standard home insurance doesn't cover damage from floods. You have to buy a separate flood insurance policy for protection. Most policies are provided through the National Flood Insurance Program (NFIP) and sold by private insurers. You can buy an NFIP policy if your community participates in the program.

Before you buy, though, learn what flood insurance does and doesn't cover, so you're not caught by surprise when you make a claim.

Here are six flood insurance limitations you should know:

1. You might need excess flood insurance coverage.

National Flood Insurance Program policies for homes are capped at $250,000 for the building and $100,000 for contents, such as furniture, clothing and other belongings. If you want more insurance you have to buy a separate, private insurance policy to cover any damage above the caps.

2. Belongings aren't covered in the basement.

Flood insurance covers only certain items in the basement, such as hot water heaters, central air conditioners, furnaces and foundation walls. Read the policy for the full list. Many other items are not covered in the basement, including carpeting and floor tile, and most personal belongings.

3. Flood insurance coverage isn't automatically extended to belongings.

You have to buy flood insurance for both the building and the contents to cover both. Unlike a standard home insurance policy, which includes a certain amount of coverage for personal belongings, flood insurance for the building doesn't automatically include contents coverage.

4. The yard isn't covered.

Flood insurance doesn't cover property outside the home, such as swimming pools, hot tubs, decks, landscaping, wells, septic systems and fences. Although it covers removal of debris on or in the home, it does not cover yard cleanup.

5. Replacement cost coverage is unavailable for belongings.

If a flood damages your furniture, electronic equipment and clothes, the insurance reimbursement will be based on the actual cash value of those items--their cost minus depreciation. Flood insurance does not provide replacement cost coverage--which pays for buying new items to replace destroyed possessions--for belongings.

6. Need temporary living quarters? Flood insurance doesn't pay the rent.

Standard home insurance includes coverage for additional living expenses, such as rent, if you have to live somewhere else while the home is repaired or rebuilt. Flood insurance does not include this coverage.

However, if the president declares your area a disaster and the home is unlivable, then the Federal Emergency Management Agency can help with temporary rental or lodging expenses.

Flood insurance provides important protection, but as with any insurance product, the devil is in the details. Understanding how the coverage works when you buy a policy will help you keep your head above water after a flood.

Barbara Marquand

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