Hurricane Harvey Insurance Coverage: Key Differences Between Homeowners Insurance and Flood Insurance

NEW YORK, Aug. 30, 2017 /PRNewswire-USNewswire/ -- For many homeowners, the distinctions between water damage covered under a homeowners policy and damage covered by flood insurance are unclear. Indeed, over 40 percent of homeowners think that standard homeowners insurance covers flood damage caused by heavy rain, according to the Insurance Information Institute (I.I.I.).

"Hurricane Harvey has, once again, shown that tropical storm systems are often major rain events, rather than wind-related. This brings strong motivation for everyone to consider flood insurance, even if their mortgage lender does not require it," said Loretta Worters, vice president of Media Relations with the I.I.I. 

However, according to the I.I.I.'s May 2016 Consumer Insurance Survey, nationally only 12 percent of homeowners have flood insurance, the lowest number since 2010 and down from 14 percent in 2015.  Furthermore, the I.I.I. notes the number of people buying NFIP policies nationwide has plunged by 549,000—almost 10 percent—since 2009, even as coastal development surges and sea levels rise. 

What's covered, what's not
Standard homeowners and renters insurance will cover wind damage from Hurricane Harvey. Flood coverage, however, is excluded and is available in the form of a separate policy from the federal government's National Flood Insurance Program (NFIP) and a few private insurers. Congress created the NFIP in 1968 in response to the rising cost of taxpayer-funded disaster relief for flood victims and the increasing amount of damage caused by floods.

The NFIP provides coverage for up to $250,000 for the structure of the home and $100,000 for personal possessions. Replacement cost coverage is available for the structure of your home, but only actual cash value coverage is available for your possessions. Replacement cost coverage pays to rebuild your home as it was before the damage. Actual cash value factors in depreciation so that the older your belongings are, the lower the payout. There are also limits on belongings stored in your basement—while essentials to the home such as a water heater, oil tank and electrical panel are included in the coverage, furniture, carpeting and other non-essentials are not.  Additional living expenses and food spoilage are also not covered. The NFIP's Summary of Coverage provides more details.

Flood insurance has a deductible and is administered through most leading insurance companies, who can help you to settle your claim with the NFIP.

Additional flood coverage available for homes valued at more than the $250,000 NFIP limit
Excess flood insurance provides protection above the NFIP limits. It is available from private insurers for higher valued properties and for those living in a community that does not participate in the NFIP. Excess flood policies have no deductible and cover Additional Living Expenses (ALE), also known as Loss of Use coverage, which pays the additional costs of temporarily living away from home if it is uninhabitable due to the flood damage. This includes hotel bills, restaurant meals and other living expenses incurred while your home is being rebuilt.

Excess flood insurance can be purchased from specialized companies through independent insurance agents, or from regular homeowners insurance companies that have arrangements with a specialized insurer to provide the coverage to their policyholders.

Options for those without flood insurance
For homeowners impacted by Harvey who did not purchase flood insurance, disaster assistance may be available through grants from the Federal Emergency Management Agency (FEMA) to help pay for temporary housing, emergency home repairs, uninsured and underinsured personal property losses and medical, dental and funeral expenses associated with the disaster. Residents who were affected can apply for assistance online at www.DisasterAssistance.gov or call 800-621-3362 or (TTY) 800-462-7585, 7 a.m. to 10 p.m. seven days a week.  FEMA's Housing Assistance program is available, regardless of income, to anyone who has suffered damages or losses in disaster-declared counties. However, aid for other losses such as personal property, vehicle repair or replacement, and moving and storage expenses is income-dependent.

FEMA does not pay to return a home to its pre-disaster condition. FEMA provides grants to qualified homeowners to repair damage not covered by insurance, but these grants may not pay for all the damage. An SBA disaster loan, on the other hand, generally provides the funds to fully repair a home. To be considered for a grant for these types of losses, the applicant must complete an application for an SBA loan.  

RELATED LINKS
Articles: How do I file a flood claim?;  How do I file a homeowners claim?
Backgrounder: Flood Insurance

RESOURCES:
Insurance Council of Texas 
National Flood Insurance Program
Small Business Administration
Texas Department of Insurance
Texas Insurance Windstorm Association

The I.I.I. has a full library of educational videos on its You Tube Channel. Information about I.I.I. mobile apps can be found here.

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SOURCE Insurance Information Institute

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