We’ve discussed before the extent to which Hurricane Katrina fundamentally changed the way the insurance industry writes policies in a flood plain. In some cases that change is pretty straightforward. They don’t write the policies at all. That’s where the politically plagued National Flood Insurance Program fills a crucial gap. (Policies average about $570 a year.)
Essentially, after Katrina, definitions became awfully important. People who had flood insurance were told the damage to their property was caused by wind; those with wind coverage but no flood policy were suddenly the victims of rising water. Five years later, many of the homeowners have yet to settle their claims or receive compensation for damages.
Flooding is the most common natural disaster in the U.S. and the one that causes the most amount of property damage. Homeowners who live in a Special Flood Hazard Area face a 26 percent risk of dealing with some degree of flood damage over the life of a 30-year mortgage and are required to take out flood coverage if their mortgage is funded through an FDIC-insured lender that is federally regulated.
There is an important loophole that is often overlooked in discussing these kinds of policies. In pretty much every case of home flooding — and that’s anywhere, not just a high risk area — you’re going to get a sewage back-up along with the high water and that damage is likely NOT covered under the flood policy.
Any homeowner facing the threat of flooding should look into the need for supplemental sewer back-up coverage. Companies have proven themselves awfully good at working coverage language to their best advantage. Sewage back-ups always require extensive repairs and, depending on the severity of the problem, may call for hazmat measures. The only way to make sure you are covered for the full extent of potential flood damage is to carry a sewage back-up policy as well.
In the post Katrina world, overlapping policies are the new norm in any flood plain. Homeowners will need wind and flood insurance in addition to their regular homeowners policies and specialized coverage like that for sewer back-ups is highly recommended.