Water Damage – Will My
Homeowners Insurance Policy Cover
It?
April 4, 2019
Gia Wilkerson
Consumer Education & Advocacy Unit
Agenda
What is the Maryland Insurance Administration?
Homeowners policies do not cover all types of water damage
What is a flood?
What water damage claims might be covered by your homeowners policy
How to purchase flood insurance
What does flood insurance sold by the National Flood Insurance Program (NFIP) cover
What flood insurance sold by the NFIP doesn’t cover
How to reduce your risk
What to do if you suffer a loss
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2018 Rain
During 2018, Maryland received over 70 inches of rain.
We had significant flooding events in Baltimore City,
Baltimore County, Frederick County, Howard County
and Washington County. Many homeowners received
water damage as a result of that rain. Some of their
homeowners insurance claims for water damage were
paid and some were denied. The question that many
homeowners ask is: what type of water damages are
covered by homeowners insurance? This presentation
will help answer that question.
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What is the Maryland Insurance
Administration (MIA)?
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• The MIA is the state agency that regulates
Maryland’s $28.5 billion insurance market.
• The MIA enforces Maryland’s insurance laws and
regulations.
• The MIA investigates and resolves complaints
and questions about insurers and insurance agents
(producers) that conduct business in Maryland.
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Homeowners policies do not cover
ALL types of water damage
The terms of your homeowners policy will
determine what types of water damage are
covered and the amount of coverage available.
Most homeowners policies DO NOT cover
flooding.
What is a flood?
The Standard Flood Insurance Policy, which is
available from the National Flood Insurance
Program (NFIP), defines a flood as:
a general and temporary condition of partial or complete
inundation of two or more acres of normally dry land
area or of two or more properties (at least one of which
is your property) from:
overflow of inland or tidal waters; or
unusual and rapid accumulation or runoff of surface
waters from any source (rain is a source of surface
water); or
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What is a flood?(continued)
mudflow (mudflow is defined as, “A river of liquid
and flowing mud on the surfaces of normally dry land
areas, as when earth is carried by a current of water);
or
collapse or subsidence of land along the shore of a
lake or similar body of water as a result of erosion or
undermining caused by waves or currents of water
exceeding anticipated cyclical levels that result in a
flood as defined above.
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What water damage claims might be
covered by your homeowners policy?
If you have purchased a water/sewer back-up endorsement,
it will pay for the damage done by the water or sewage that
backs up into your home (subject to terms, conditions and
limits). Many policies WILL NOT cover the cost to repair
or replace the pipe or drain.
The scope and amount of the water/sewer coverage will be
determined by your homeowners policy.
Maryland law requires that your insurance company offer
you this type of coverage with the same limits as you have
for dwelling coverage and most companies offer several
additional coverage limit options.
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What water damage claims might be
covered by your homeowners policy?
If a pipe in your home suddenly bursts and water flows all over the floors,
generally a homeowners policy will cover the damage caused by the water.
Generally, the repair or replacement of the pipe itself is not covered.
If you have a slow leak, regardless of when you discover it, most
homeowners policies will not cover the damage that results from that leak.
Also, it is important that during the winter, you maintain appropriate heat in
your home, especially if you are planning on being away from your home.
If a pipe bursts due to your failure to maintain appropriate heat, the loss
may not be covered by your insurance policy.
You should check the terms of your policy to learn more about the scope
and amount of coverage that your specific policy provides.
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What water damage claims might be
covered by your homeowners policy?
If rain enters your home through your roof that
has been properly installed and maintained,
your homeowners policy will typically cover
the damage.
If rain enters your doors or windows, this may
or may not be covered depending on whether it
is surface water and it enters from ground
level.
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How do I get coverage for flood
damage?
You can purchase a flood insurance policy:
from the National Flood Insurance Program (NFIP);
in the private market; or
through a surplus lines carrier.
Talk with your trusted insurance producer to discuss these
options.
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Things to Consider When Buying
Flood Coverage
Amount of coverage you want.
Type of coverage (replacement value or actual cost).
If your home or business is in a Special Hazard Flood Zone and you have a
mortgage, private insurance may not fulfill your lender’s mandatory
purchasing requirement.
Policies issued by surplus lines companies are not protected by Maryland’s
Property and Casualty Insurance Guaranty Fund.
Surplus lines companies are exempt from certain requirements under the
Insurance Article and thus, such policies may not include the same
consumer protections as a policy issued by another insurer.
Your insurance producer can help you determine what policy is right for you.
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Facts about flood insurance sold by the
NFIP
An NFIP flood insurance policy can be purchased from an insurance
producer or insurer who participates in the NFIP. The NFIP Help Center
can be help with a referral by calling 800-427-4661.
You can buy flood insurance whether you live in a single family house or a
condominium if your community participates in the NFIP.
To find out if
your community participates in the NFIP, contact your NFIP insurance
producer or visit https://www.fema.gov/cis/MD.pdf
.
Whether your flood risk is high or low, most property owners in a
community that participates in the NFIP can buy building and/or contents
coverage, but there are exceptions.
Property owners located in low-to-moderate risk areas should ask their
agents if they are eligible for the Preferred Risk Policy (provides flood
insurance protection at a lower cost than a standard policy in a high
risk area).
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Facts about flood insurance sold by
the NFIP
You can purchase flood insurance at any time. There is usually a
30-day waiting period after premium payment before the policy is
effective but there are some exceptions including but not limited to:
If the initial purchase of flood insurance is in connection with
the making, increasing, extending, or renewing of a loan, there is
no waiting period. Coverage becomes effective at the time of the
loan.
The 30-day waiting period may not apply if your property
experiences flood damage caused by wildfire in your
community.
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Flood Facts
More than 25 percent of flood insurance claims come
from properties that are not in an identified high risk
zone, but most homeowners in these areas are eligible
for coverage at a preferred rate.
To learn more details about your home’s level of
flood risk, including the type of flood zone it is in, go
to: https://msc.fema.gov/portal/
or
www.floodsmart.gov.
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What does flood insurance sold by
the NFIP cover?
You can insure residential properties up to
$250,000 for the building, and up to $100,000
for the contents. Commercial properties can be
insured for up to $500,000 for the building, and
up to $500,000 for the contents.
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What does flood insurance sold by
the NFIP cover?
There are two types of coverage available under the National Flood
Insurance Program:
Building property, which includes the insured building and its
foundation, insulation, electrical and plumbing systems, built in
cabinets, furnace, hot water heater, as well as major kitchen appliances
like the refrigerator, stove and a detached garage.
Contents coverage for your personal property. (For example, personal
belongings such as clothing, furniture, and electronic equipment;
curtains; portable and window air conditioners; portable microwave
ovens and portable dishwashers.)
These coverages are purchased separately and carry separate
deductibles.
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Replacement cost or actual cost value
coverage
Replacement cost coverage is available for single-
family homes.
Single-family homes include a residential
condominium unit that is the policyholder’s principal
residence; and
is insured for at least 80 percent of the unit’s
replacement cost at the time of the loss.
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Replacement cost or actual cost
value coverage
Personal property is always adjusted on an actual
cash value basis.
• Actual cash value means the cost to replace an insured item
of property with “like kind and quality” at the time of the
loss, less the value of physical depreciation of the damaged
item.
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What does flood insurance sold by the
NFIP cover?
Basements:
The policy offers limited coverage for basements. The
NFIP defines a basement as: "any area of the building,
including a sunken room or sunken portion of a room
having its floor below ground level (subgrade) on all sides."
Unimproved structural parts such as walls, foundation and
utility connections are covered. Coverage usually applies to
sump pumps, water tanks, furnaces, air conditioners and
clean-up as part of the building coverage. Finished portions
of a basement, by law, are not covered.
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What is not covered under an NFIP
flood policy?
Wind-Driven Rain is not Considered Flooding:
Rain entering through wind-damaged windows,
doors or a hole in a wall or roof that results in
standing water or puddles is considered
windstorm damage, not flood damage.
The NFIP only covers damage caused by a
general condition of flooding.
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What is not covered under an NFIP
flood policy?
Additional Living Expenses:
Flood insurance does not provide for additional living
expenses. Most homeowners policies have some
additional living expense benefits, but that coverage is
only available if the home is not livable as a result of a
covered cause of loss under the homeowners policy.
Remember: Homeowners insurance typically does
not cover damage from a flood.
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Reduce Your Risk
Decide how to prepare and protect your home from flooding
based on your home’s flood risk and create a plan to mitigate
the risk to your property: www.ready.gov/make-a-plan
Outside the Home:
Maintain proper water runoff and drainage
Improve lot grading
Reduce impervious surfaces around your home
Install a rain barrel
Elevate utilities and service equipment
Anchor outdoor fuel tanks
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Reduce Your Risk
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Inside the Home:
Protect your valuable possessions
Seal your foundation and basement walls
Install flood vents
Install a sump pump
Prevent sewer backups
Use flood-resistant building materials
Raise electrical system components
Protect utilities and service equipment
Install a flood alert system
Bringing property up to current
building code
The Increased Cost of Compliance Coverage (ICC) under the
standard NFIP flood policy building coverage form provides
additional monies to:
Help pay for the cost to comply with state or community
floodplain management laws or ordinances from a flood event in
which a building has been declared substantially damaged or
incurred repetitive damage.
ICC coverage will help pay for the cost to elevate, flood-proof,
demolish or relocate the building (or any combination of these
activities) up to a maximum benefit of $30,000.
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After a Loss
Contact your insurance company promptly after
sustaining a loss.
Take photographs and/or video of the damaged areas.
Make only those repairs necessary to prevent any
further damage. Do not make permanent repairs before
talking to your insurance company.
Before you remove any damaged property from the
premises, be sure an insurance adjuster or your agent
has seen the damage.
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After a Loss
Keep all receipts for emergency repairs.
As soon as possible, prepare a detailed inventory
of all damaged or destroyed property. Give a copy
to the insurance adjuster and keep a copy for
yourself. It should include:
• Description and quantity of items.
• Date of purchase or approximate age.
• Cost - time of purchase and estimate to replace.
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After a Loss
Be present when your insurance adjuster inspects
your property.
Do not accept an inadequate settlement offer.
Cashing a check may bar you from seeking additional
compensation; confirm in writing that it will not.
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Summary
Consider making improvements or repairs to the property
that may mitigate loss or damage.
Review your policy to see what your deductible would
be.
Determine whether you have Actual Cash Value (ACV)
or Replacement Cost Value (RCV) coverage.
If you do not understand your policy, consult with your
insurance producer or company and ask them to explain
it.
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Reminder
If your insurance company denies any part of
your claim, be sure they put the denial in writing
and you keep all the paperwork.
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Contact Information
Al Redmer, Jr., Maryland Insurance Commissioner
Office: 410-468-2090
Cell: 443-845-0802
Maryland Insurance Administration
1-800-492-6116
www.insurance.maryland.gov
National Flood Insurance Program
1-800-427-4661
www.floodsmart.gov
Maryland Home Improvement Commission
1-888-218-5925
www.dllr.state.md.us/license/mhic/
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Publications Available on MIA’s
Website
Check out the following publications for more
information.
An Insurance Preparedness Guide for Natural Disasters
A Consumer Guide to Disaster-Relief Resources
Consumer Guide to Homeowners Insurance
Why Renters Insurance is a Good Idea
Should I Hire a Public Adjuster to Help Me Settle My Claim?
Consumer Guide to Auto Insurance
Property Damage – What to Do After A Loss
Weather Related Damage – Frequently Asked Questions about
Insurance Coverage
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Questions?
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