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Understanding Flood Insurance After Hurricane Harvey

Guided Wealth
By: Guided Wealth
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It's hard to put into words the devastation Hurricane Harvey brought to Houston and other parts of Texas this month. While a tremendous number of donations have been made to help families rebuild, the flood insurance industry is obviously working overtime to help their policy holders recover. If you have questions about flood insurance, below are some of the most important things you need to know.

Tragically, 80% of people in Houston who lost their homes didn't have flood insurance. Those who did are going to have to read their contracts carefully. When you obtain this type of insurance, it's not always as comprehensive as you might think.

While this might sound concerning during a time of crisis, it's important for those of you in the Millennial and Generation X demographics to prepare. With future weather perhaps being more volatile here, what should you look out for in your flood insurance policy?

Here's a look at what flood insurance covers and doesn't cover.

No Flood Damage Coverage Through Standard Homeowners Insurance

It's unfortunate so many people buying a standard homeowners insurance policy think it's going to protect them if they experience flood damage. This was perhaps the case here in Texas, despite most homeowners policies covering some damage from rain.

However, if you have complete devastation from a flood, you're not covered financially. The only thing that's going to cover you is standalone flood insurance. (See health risks of flood water.)

The federal government provides such an insurance through FEMA, known as the National Flood Insurance Program.

It's worth looking into what they offer. However, look carefully at things they may not cover beyond initial damage from a massive storm.

What the National Flood Insurance Program Covers

The NFIP covers up to $250,000 in damages to your home, even if many in Texas may have much more than this in costs. It's also only one half of the policy generally offered. NFIP also offers up to $100,000 in personal property protection.

Those of you affected by Harvey may have to buy excess flood insurance, which is separate from the federal program. While it means spending money for another policy, it gives you comprehensive damage coverage.

You'll find a lot of familiar insurance names offering this type of insurance from AIG to Lloyd's of London. Keep in mind that if you get a federally funded mortgage, and live in a high-risk flood zone, you'll have no choice but to buy this type of insurance.

What Flood Insurance Doesn't Cover

The NFIP above does have numerous limitations, so be sure to read the fine print. One thing they don't cover is damage from mold, mildew, or moisture that was avoidable by the property owner.

They also don't cover temporary living expenses if you're staying in another location due to your house being flooded. This includes loss of use or access to your insured property.

Any property outside of your home isn't covered either. Many people end up devastated their flood insurance doesn't cover losses like damaged trees, wells, decks, patios, fences, or swimming pools. These policies don't cover damage to your cars either, or currency and precious metals.

What About Basements?

While most Texans don't have basements, it is worth noting that flood insurance has coverage limitations that specifically apply to basements. You'll even find limitations on crawlspaces and walkout basements.

Things not covered in basements include bookcases, carpets, as well as any walls and ceilings not made of drywall. All your personal property in the basement like clothing and furniture aren't covered either, unless you get the additional personal property policy.

You may even have to deal with properly defining what a flood is. Through the NFIP, the flood has to cover at least two acres of land before it's officially deemed a flood disaster.

Any flood also has to come from tidal waters, runoffs from surface waters, or mud flows. Remember, any flood from your own drainage system isn't deemed an actual flood in NFIP terms.

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Do You Need Immediate Help Recovering From Hurricane Harvey?

If you have been impacted by Hurricane Harvey and need help figuring out your next financial steps, use the button below to schedule  a completely free conversation with Jon Swanburg, our head of Financial Planning. (Or click here for a complete list of Hurricane Harvey relief resources compiled by the State Bar of Texas.)  We, like many of you, have been helped by so many in the community during this time of crisis and we are eager to pay it forward by offering financial guidance to those in need.   

This is not for questions about investments but rather topics like: Who can you contact to reduce utility payments? How do you pay off the credit card debt that may pile up?  Or What are the implications of taking a loan from the 401k to pay for repairs? 

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