This spring has been a difficult time for many folks in Nebraska and Iowa due to late winter storms and flooding. Many who experienced flood losses were unpleasantly surprised to find out their homeowner’s insurance did not include flood insurance.
The Federal Emergency Management Agency (FEMA) has a National Flood Insurance Program (NFIP) that provides flood insurance coverage. Some private insurance companies also offer flood insurance. If your home is in an area that is considered a flood plain, you will be required to prove you have flood insurance before you can obtain a mortgage. Your bank is required to make sure you have the proper flood insurance coverage required by the mandatory flood insurance guidelines.
There are two types of flood insurance coverage: one for the building and the other for the contents.
The minimum requirement for flood insurance if you are obtaining a bank loan is the lesser of:
- The outstanding principal balance of all loans secured by your property,
- The insurable value of the property minus the land value, or
- The maximum amount of insurance available under the principal flood insurance program.
Insurable value for flood insurance purposes may be based on the cost to replace the property or the actual cash value of the property.
The maximum amount of insurance on a single-family home (the building) is $250,000. For the home contents, the maximum amount of insurance is $100,000.
It is important to know that basements have only limited coverage.
Under most flood insurance policies, the only covered items located in the basement are those that affect the floors above ground. Items such as the HVAC systems, electrical systems, and water heaters located in the basement would be covered. Basement flooring, furniture, and personal items in the basement would not be covered. Don’t make the mistake of thinking that your homeowners or renter’s insurance will cover damage from flooding. No matter where you live, you should have flood insurance to provide peace of mind should our area encounter a flooding situation again. If you have any questions on obtaining flood insurance, please reach out. I’d be happy to point you in the right direction!
Judith Ackland has more than 26 years of experience in accountancy and financial planning, including seventeen years as a CFO of a diverse business. She started Crystal Financial in 2010 to help a wide array of individuals, families, and business owners better understand their finances and how good financial management could help them achieve their goals. Judith has an MA in Professional Accountancy from the University of Nebraska at Lincoln as well as a Certified Public Accountant Certificate and a Certified Financial Planner designation.