WEDNESDAY, NOVEMBER 18, 2020
Home insurance is designed to cover your home and items against several different risks. However, basic home insurance policies don’t cover everything.
In most circumstances, home insurance policies will not cover water damage to your physical home or your personal belongings. This may include damage caused by natural floods and burst pipes.
Why is Flood Damage Not Covered by Home Insurance?
Flooding is technically considered a gradual event rather than a sudden event. Home insurance is only designed to cover accidents and unavoidable damage. If it can be argued that damage to your home or belongings was avoidable, you may not be covered. Any damage caused by negligence on behalf of the homeowner will not receive compensation through home insurance.
Unfortunately, there are circumstances where a flood can be sudden and unexpected. You can’t avoid every accident, so it is important to make sure that you have coverage for water damage when you need it.
Flood Insurance
Flood insurance is an optional policy offered by some insurers to cover natural flooding. If you purchase this insurance, you should be covered in case of a natural flood caused by a storm or natural disaster. In some cases, this insurance may be required by your mortgage lender. This usually only occurs if you live in a high-risk area for floods. If you live somewhere that has a history of severe flooding, you may be required to carry flood insurance. Some states also offer flood insurance through state mandated programs such as FEMA. FEMA works with around 90 private insurers to provide flood insurance to property owners.
If you live in an area with a history of flooding, it is important to search for a private insurer that offers flood insurance.
Sewer Backup
Sewer backup coverage is another optional policy offered by many insurers. You can purchase this additional endorsement to cover sudden pipe bursts and other sewage issues. For example, if one of your sewer pipes bursts and causes water damage to your home, sewer backup coverage can cover the expenses. It can also cover your belongings that are damages or destroyed due to sewer backup.
Accidental damage may be covered under flood or sewer backup coverage, but damage due to negligence will not be covered. Negligence refers to the homeowner failing to prevent or anticipate possible damage. For example, say a flood sweeps in with a bad storm, along with substantial flood warnings. The first floor of the home floods and later grows mold. Damage caused by this flood may be covered only if you have a flood insurance policy. However, the mold will typically not be covered. This is because mold is seen as caused by negligence. The homeowner is expected to prevent and treat mold before it can cause damage.
How Much is Flood Insurance?
Flood insurance prices vary depending on several different factors, including your location, claims history, coverage limits and the value of the home or belongings you want to insure. This insurance is relatively affordable to add to your policy, however. In general, you may pay less than $100 a month for a flood insurance policy. Be sure to speak with your insurance agent about how much flood insurance you need and how much you can save. You should generally have enough flood insurance to cover your home’s dwelling and the value of your personal belongings.
Water Damage and Personal Belongings
Water damage works much of the same way with personal belongings as it does with the physical dwelling. Compensation may be different, however.
In general, you have two options when it comes to personal belongings compensation: actual cash value and replacement cost value.
An actual cash value compensates you for damaged or destroyed belongings after accounting for depreciation. This means that you will receive less compensation as the value of your belongings goes down over time. For example, say you purchase a television for $1,000. A few years later, your television is destroyed in a flood. By this time, the TV has depreciated to $400. This means that, when you file an insurance claim, you will receive closer to $400.
A replacement cost value compensates for your damaged or destroyed belongings without accounting for depreciation. This means that, no matter how much the market value of your belongings drops, you will receive compensation to replace the item with one of similar or identical value. This type of policy is usually more expensive, but it is more likely to replace your items completely after an accident or disaster.
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