Flood Insurance Coverage Limitations To Know

Policy limitations for flood insurance coverage vary with regard to the type of policy you purchase. In general, there are two types of flood insurance that may be purchased through the National Flood Insurance Program’s approved casualty and damage insurance companies, and these types of coverage are preferred rate policies and stated rate policies.

Preferred Risk Policies

Preferred risk policies for homes and buildings located in National Flood Insurance Program communities that are considered as moderate to low risk. Homeowners, renters and business owners can purchase flood insurance at preferred low risk rates, in these communities if the community meets the standards for acceptance as preferred rate community. To qualify participating communities must meet minimum standards for local building codes, regulations and ordinances that promote good building practices, and offer increased flood prevention and protection tactics and methods. Preferred risk policies offer two types of coverage: building and contents and contents only.

Owners of condominiums also should be aware that condominium associations are not eligible for preferred risk policies. However, condominiums owned by an individual resident are eligible for preferred risk policies. Coverage rates for these types of policies range from $119 to $348 per year.

Standard Stated Rate Policies

For homeowners, renters and business owners that live in high-risk areas, or areas that are determined to have a 1 percent chance or higher of a significant flooding any given year, preferred risk policies are not available. If you live in a high risk area, you're required to buy a standard stated rate policy.

Standard stated rate policies are generally more expensive. However, they do offer a few more coverage options; for example, stated rate policies offer you the choice of getting coverage for: building and contents coverage, building only coverage or coverage for the contents only. Moreover, if your NFIP community is meets minimum community rating system CRS requirements, your community may qualify for discounts on the NFIP standard rated policy premiums.

In addition, single family homes that are the primary residence and are insured at the maximum amount of flood insurance available, or no less than 80% of the replacement costs at the time of loss, may also qualify for replacement cost claim settlement. In addition all of the buildings and/or damaged contents will be adjusted to their actual cash value less depreciation. Typical rates for standard state rate policies range from $434 to $1385 per year.

Coastal Area Policies

In addition, there is a separate rate scale for coastal high-risk areas, as related to flood insurance coverage. Coastal area standard stated rate policies for coastal areas are the same as standard policies mentioned above, except they are more expensive. Rates for high risk coastal areas range from $550 to $2530 per year.

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