Is My Property Covered Against Water Damage or Flood?
When homeowners or real estate investors are looking to purchase a new property, they often forget to ask, "is the property in a flood zone?". The good news is you have choices; you can purchase flood insurance if your property is in a flood zone or is not in the flood zone. I always recommend purchasing flood insurance for that added protection of an unplanned flood. Currently, you can purchase flood insurance through FEMA or through the WYO "Write Your Own" flood program through private insurers.
Flood insurance is available for homeowners, business owners, and even renters. There is a difference between how water losses are considered a flood and a covered hazard insurance water loss. Hazard insurance policies would provide coverage for Water Damage that occurs as a sudden and accidental discharge of water. This can often be from a broken pipe, toilet, refrigerator, washing machine, or HVAC system that doesn't drain properly, causing a flood. The resulting damage can be severe, depending on the leak's location and the amount of time it has been leaking. Water damage can often occur on second floors and then leak to the lower levels and cause extensive and expensive claim damage.
I often get the question from investors, "is water damage covered that originates from the roof?" This is always reviewed on a case-by-case basis but can be covered if related to a covered peril from a storm (hail).
Even though each claim has its merits, flooding events like surface groundwater or flash flood are typically excluded from hazard insurance policies.
Flood damage is damage to the home, personal property, or commercial building directly resulting from a flooding event. There should be significant rain over a short period to create a flooding event or flash flood.
Suppose the rental property or commercial building is in a high-risk flood zone. In that case, the property owner must have a separate flood insurance endorsement or policy to have coverage for a flood caused by weather events.
Flood insurance is often required by the mortgage lenders for properties that are in a designed flood zone. The most common flood policy usually covers the building or home. I always recommend to the investor to include coverage for property inside the building and a loss of rents or additional living expense coverage. These additional costs for additional living expenses and contents can sometimes be greater than the damage to the building or home. I review many flood policies, and I have found that many policies do not include these important coverages.
Flood insurance will provide money to repair or even rebuild a home if damaged or destroyed by a flood. When a homeowner has to file a claim, they are only responsible for paying the deductible. As a result, the homeowner retains the home, keeps making their mortgage payments, and everyone will be happy.
According to FEMA, a flood insurance policy covers the following:
- The insured building and its foundation
- Electrical and plumbing systems
- Central air conditioning equipment, furnaces, and water heaters
- Refrigerators, stoves, and built-in appliances such as dishwashers
- Permanently installed carpeting over an unfinished floor
- Permanently installed paneling, wallboard, bookcases, and cabinets
- Window blinds
- Detached garages up to 10% of building property coverage (detached buildings other than garages require a separate building property policy)
- Debris removal
If you notice above, what is not covered is the loss of use/additional living expenses and or loss of rents.
In Colorado, purchasing the right flood insurance can be difficult. Before purchasing your new property, ask to see if the property is in a high-risk designated flood zone before initiating the property purchase.
Feel free to contact me to assist you with the right flood policy for your investment property.