Flood damage is excluded under standard homeowners and renters insurance policies. Flood coverage, however, is available in the form of a separate policy both from the National Flood Insurance Program (NFIP) and from a few private insurers.
Congress created the NFIP in 1968 in response to the rising cost of taxpayer-funded disaster relief for flood victims and the increasing amount of damage caused by floods. The NFIP makes federally backed flood insurance available in communities that agree to adopt and enforce floodplain management ordinances to reduce future flood damage. The NFIP is self-supporting for the average historical loss year. This means that unless there is a widespread disaster, operating expenses and flood insurance claims are financed through premiums collected.
The NFIP provides coverage for up to $250,000 for the structure of the home and $100,000 for personal possessions. Private flood insurance is available for those who need additional insurance protection, known as “excess coverage,” over and above the basic policy or for people whose communities do not participate in the NFIP. Some insurers have introduced special policies for high-value properties. These policies may cover homes in noncoastal areas and/or provide enhancements to traditional flood coverage. The comprehensive portion of an auto insurance policy includes coverage for flood damage.
A 2011 poll by the Insurance Information Institute found that 14 percent of American homeowners had a flood insurance policy, up from 10 percent in 2010 but still below the 17 percent who said they purchased flood insurance in 2008. The percentage of homeowners with flood insurance was highest in the South, at 19 percent, up from 14 percent in 2010 and back to the level of 2009. Thirteen percent of Midwestern homeowners had a flood insurance policy in 2011 along with 12 percent of homeowners in the West and 5 percent in the Northeast.
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