Another question stimulated by the Southern Alberta floods…
I guess it is standard at least up here that overland flooding (as opposed to sewer backup) is NOT covered by insurance. Is that typically the case in the US? I seem to recall that there is some sort of special flood insurance people can get in the US if they want it. Is that the case? If so, can you summarize how it works?
If this is state-dependent rather than completely federal, pick a jurisdiction; I am just curious. Might be worth fighting for up here.
Commercial flood insurance is expensive in the US because it covers any form of flooding. A pipe breaks in you basement and you have reason for a claim. Insurance companies are reluctant to grant policies for fear of losing money and set the rates so high that few homeowners can afford it.
There is a federally subsidized flood insurance available, however.
I’m not familiar with any commercial flood insurance in the USA. The only flood coverage that I’m aware of must be purchased from the federal government for those properties that are in flood plains according to FEMA.
If a plumbing pipe breaks in your home, that claim is covered by normal homeowners insurance.
Flood policies only cover ground water where flooding occurs in a generalized area. Claims are handled by the individual insurance companies, but are refunded to the insurer by the federal government.
Note that one of the reasons flood insurance is not available is that floods tend to happen in, well, flood plains and coastlines. Why should either the private insurance system, or the government, institutionally protect people who choose to build homes in flood plains or coastlines?
This is different from other types of insurance, such as fire insurance, which can happen anywhere, and where the homeowner can take reasonable steps to prevent or mitigate fires.
As well, floods tend to be large-scale disasters, so a single flood could have a major payout risk for the insurer, unlike things like most house fires.
I believe that three items are not normally covered by homeowners’ insurance: Floods (e.g. any groundwater), earthquakes, and acts of war. Anything nuclear (e.g. Three Mile Island) is considered an act of war.
It sounds like homeowner’s insurance in Canada and the US have similar restrictions about flooding. Flooding cause by rising rivers or groundwater is not covered under a standard homeowner’s insurance contract. A flooded basement from a burst pipe is covered.
It’s not an act of war in Canada, but it’s not covered by normal insurance rules. The federal government has passed a law which provides that both the operator of a nuclear facility and the federal government are responsible for compensation in the event of a nuclear accident. The operator is expected to carry insurance, while the feds will compensate for things that the operator cannot get insurance for.
The current Act is called the Nuclear Liability Act. There is a proposed new Act, to be called the Nuclear Liability and Compensation Act, which will bump up the amount of compensation availalble.
Unfortunately, it’s not “insurance people can get,” it’s insurance *you are required to get *when you buy a house that FEMA has declared to be on a flood plain. :mad:
Even if your house is 40 feet above the local creek, which usually runs 4 feet deep.
More than 3. There’s basic form, broad form, and special form insurance.
Basic covers fire, smoke, vandalism, lightning, etc.
Broad would include burglary, falling objets, your room collapsing under ice, etc.
Basic and Broad are inclusive policies as in they list what they cover. Special is exclusive as in they cover everything except: Ordinance of law, earthquake, flood, power failure, neglect, war, nuclear hazard, and intentional acts.
So depending on what kind of insurance you have, what’s covered vs not covered can range wildly.
Sort of a nitpick. It’s required by some mortgage companies to protect their investment.
If you pay cash, you can, in theory, tell the insurance people to take a hike. Otherwise, it’s a more or less reasonable condition they insist upon so they feel better about loaning you vast sums of money.
It is not a theory. You don’t have to buy FEMA flood insurance if you own the property outright. My neighbors live in a flood zone (and so do I) and own their house out right and wasn’t paying for flood insurance. But as soon as they applied for a home improvement loan they were required by the lender to get it. They are planning on paying the loan off as soon as possible so that they can drop the flood insurance.
My mortgage company tried to get me to buy flood insurance because the bottom corner of my yard was in a “flood zone.” I put flood zone in quotes because I lived across the street from a lake, up a fairly steep hill. My lot was long and narrow, with the house sitting at the uphill side. Before the lake water would be the ~150 feet up the hill to the house, the dam would breach first. Luckily I got out of the requirement, IIRC it was $1000 per year back in the mid 1990s when my mortgage was $600 or so a month.
I have neighbors whose yard is in the flood zone but the house isn’t; so they don’t have to pay. Also, if the portion of your house is in the flood zone but not finished or habitable you can get out of paying it to. The apartment next to me is actually up on silts and has parking in the flood zone; they don’t have to pay for flood insurance since the cars can me moved to high ground on the same property if need be.
FYI. Flood insurance cost me $3800 a year on a $865 a month mortgage.
I thought a flood zone had to be either 2 acres of land or 2 separate properties, or is that to merely declare land as a flood zone and once a sq. in. of your actual house touches designated flood zone area you have to buy the insurance?
Nope. Your house can be in the flood plane and as long as the basement isn’t open to the yard and the first floor is above the flood plane level; then you do not have to buy FEMA insurance. I reviewed this quite a bit when I bought my house and considered walling up my walk out basement in order to get out of the FEMA requirement. In the end I decided that one of the reason I wanted the house was because you could walk out of the basement.
In fact, the only reason my house was placed in a flood plane was because the levy up stream was in disrepair and FEMA moved the flood plane area into my yard before I bought the place. It’s why the previous owners were wanting to sell. I am now in the process of petitioning FEMA to take my house out of the flood plane now since the levy was upgraded last summer.
Thanks. This is what I was trying to say and apparently doing a poor job of it.
For those of you who currently have flood coverage, please read before cancelling your flood policy:
When I bought my current home, the mortgage company required me to purchase flood insurance. I have a small meandering creek at the back of my property that had never flooded before. As a career insurance adjuster, I argued until I was blue in the face that I didn’t NEED flood insurance. They forced the issue so I purchased it with the intent of applying to FEMA to have the maps redrawn removing my property. I never got around to filing with FEMA.
As luck would have it, 10 years later we had 4 inches of rain in like 2 hours and my entire neighborhood was flooded. I had over $65,000 in damage to my home which was all covered by the flood policy. I didn’t do it but felt I should have sent my mortgage company a thank you note…