Many professional artists and home owners mistakenly assume that the same insurance policy that covers them for fire, theft, and other perils also covers them for flood damage. While a typical business insurance, homeowners' insurance, or renters' insurance policy covers water damage as a result of wind or other physical damage to your structure, it is important to know that it generally does not cover damage from floods or "rising water."
Nationally about 50% of property owners in areas at high risk of flooding have flood insurance. The government defines a high risk area as one in which there is a 1% chance of flooding in any given year. While this is commonly called a "100 year" flood zone, it really means that you have a 25% chance of flooding during the course of a typical mortgage. And, the National Flood Insurance Program reports that 20% of damage claims it receives are from property owners in areas with low to moderate flood risk.
The primary source for flood insurance is the National Flood Insurance Program (NFIP) underwritten by the federal government and administered by the Federal Emergency Management Agency (FEMA). The policy is purchased through private insurance brokers, and a good place to start is with the agent that handles the insurance on your business or home. If you have a mortgage and live in a high risk zone, there is a fair chance that you already have some coverage - many lenders require it. However, the lenders usually require only enough coverage to protect their investment. You may have no coverage for your equity or for the contents of your building. Worse yet, if you are not covered and are flooded, you may still be liable for the mortgage payments on a building you cannot use.
There have been many calls for flood insurance to be included in all property insurance plans, and maybe one day it will. But for now, you must purchase a separate flood insurance policy if you want protection against flood damage. While it is theoretically possible to purchase privately underwritten flood insurance, it is usually much more expensive than that available from the NFIP.
Artist's studio washed down the street in Tropical Storm
Irene flooding in Shelburne Falls, MA. Photo: John Sendelbach
Who Can Buy Flood Insurance?
Flood insurance through the NFIP is not available everywhere. Participation in the program requires an agreement between the federal government and local governments to place limits on construction in flood-prone areas. If your community has chosen not to participate or fails to comply with the regulations, your only options are to purchase (usually more expensive) insurance from a private carrier or go without insurance.
National Flood Insurance is available to homeowners for first and second homes up to a maximum of $250,000. Homeowners and renters can purchase flood coverage for contents of a building up to $100,00. Businesses can get up to $500,000 flood insurance on a building and up to $250,000 on the contents. Contents of the building is not automatically covered - you must declare a specific amount and a separate premium is charged. If you need more insurance than that you will have to purchase the additional insurance through a private carrier.
You must purchase a separate policy for each structure you wish to insure. The exception is that a detached garage can be covered for up to 10% of the policy, but only if it is used as a garage for storage. If your studio is in the garage, it would not be covered, nor would the contents unless you purchase a separate policy.
How Much Does it Cost?
The cost of flood insurance is based upon the risk of your property flooding. You can get an instant estimate of your flood risk and insurance premiums at www.FloodSmart.gov.