Floods are the most common and the most costly natural disaster in the U.S. In the last decade, floods caused over $155 billion in property damages. According to a testimony by Federal Emergency Management Agency Michael Grimm, around 4.3 million homes in the U.S are at high risk or sustaining economic damage from floods, and most of them are not required by National Flood Insurance Program to have flood insurance.
As sea levels are rising, the flood risk is only increasing, and it is more important than ever to make sure your insurance policy cover flood damages if you live in a high-risk area.
Does regular landlord insurance cover flood damage?
Like traditional homeowners insurance policies, flooding is typically excluded by landlord insurance policies. This is true regardless of the source of the flood damage, whether from storms, oversaturated grounds, or overflowing lakes or streams.
With that in mind, landlords who have a property that requires flood insurance should pay attention. This type of insurance can help protect your investment, but it's crucial to understand how this coverage works, what it actually protects against, and whether you need it in the first place.
You can add flood insurance to a landlord insurance policy regardless of where the property is located. You'll just have to work with your insurance company to add this coverage to your existing policy, and you'll have to pay more money for the added protection you receive.
There are also some nuances with landlord flood coverage that you may not know about. For example, landlord flood insurance will cover the cash value of the property in question instead of the replacement cost. This makes it different, and perhaps less valuable, than flood insurance policies you can purchase for a primary residence.
What type of damages does landlord flood insurance cover?
Aside from the fact that flood insurance for landlords provides actual cash value coverage instead of replacement cost, it works similarly to traditional flood insurance.
For the most part, this type of insurance provides coverage for the physical structure of the buildings you own, as well as their foundations. Other covered components can include plumbing and electrical, central air and heating systems, and a detached garage. If a rental property has other detached structures, they may need their own separate policy.
Like other types of insurance coverage, however, you can often tailor your flood insurance to your needs. For example, you may be able to buy additional coverage that applies to items like appliances, window coverings, furniture, and more.
Who is required to get flood insurance?
The Federal Emergency Management Agency (FEMA) is the ultimate authority on which buildings are required to have flood insurance by law. They do this by designating Special Flood Hazard Areas that show which areas in the country are most vulnerable to flooding and the damage it creates.
Simply put, properties that are within SFHA areas are required to have flood coverage, whereas others are not. If you're curious whether a property you are considering is within a FEMA flood area, you can search the FEMA flood map here.
That said, it can make sense to add flood insurance to your landlord policy if this is something you're worried about. After all, you may be particularly sensitive to the risks caused by water damage. Or, maybe you know about potential risks for flooding in the future that aren't yet represented in FEMA's Special Flood Hazard Areas.
How to Get the Most Out of Your Landlord Policy
When it comes to getting superior value from your landlord insurance coverage, you should strive to make sure you're not overpaying. In other words, make sure you take the time and effort required to shop around.
By taking steps to get several landlord insurance quotes and comparing different policies, you can ensure you're getting the best deal for the properties you want to insure. Just make sure that any comparison you make is truly apples-to-apples, and that you're only comparing policies that have similar coverage limits, inclusions, and perks for customers.
In the meantime, make sure you're only paying for coverage you actually need. This may mean skipping over flood insurance if you're not in a high risk area, yet it never hurts to prioritize this coverage if you truly think you need it.
Other ways to save money include adjusting your landlord insurance deductible upwards in order to secure lower premiums and making sure you're asking for any insurance discounts you may be eligible for.
As an example, it may be possible to pay less for landlord coverage if you insure multiple properties with one company, you sign up for automatic payments, or you opt for electronic payments. When it comes to discounts, you may not know all that's available to you until you check.
The Bottom Line
If you're in the market for flood insurance for landlords but you can't decide whether to pull the trigger, speaking with a licensed insurance agent can help. After all, an insurance professional is often the best person to advise you on the cost of this type of policy, what it covers, and what can happen if you decide to go without.
Flood insurance for landlords may require additional monthly premiums you don't want to pay, but the peace of mind you receive can be well worth the investment. By learning more about flood insurance for landlords and comparing more than one policy, you can position yourself to make an educated decision.