I have a flood policy. What does it cover?
A: This policy covers only one peril -- damage from flooding (including rising waters, mud slides and certain damages from erosion). Not all flood policies cover both building and contents. Additionally, all flood policies carry a deductible that applies separately to both building and contents losses. There are many types of property that are not covered under a flood policy, including property in the open, certain property in basements, trees, plants and shrubs, driveways, foundations, piers, sidewalks, docks, etc. Also, there are other types of property for which coverage is provided for only a very limited amount (for example, $250 for jewelry, furs, silver, gold, fine arts and similar items). Reimbursement for additional living expenses is not provided under the flood policy.
Replacement coverage is provided under the flood policy for dwellings only if the home is the primary residence of the insured and is insured for at least 80% of its replacement cost (or the maximum available under the program). All other losses are adjusted on an actual cash value basis, including losses to contents, and losses to other items such as carpeting, antennas, awnings, appliances and miscellaneous outdoor equipment.
Unfortunately, many people discover they are not eligible for replacement coverage on their building due to under-insurance. Quite often, they only purchase this coverage at the time they are closing on a home because the lender requires it. Generally, they purchase only enough coverage to satisfy the mortgagee, rarely update this amount and often don't purchase coverage for their contents.