Facts about flood insurance: What you need to know

Understanding insurance could save your money

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DETROIT – Thousands of Metro Detroiters have been trying to clean up and carry on after a historic flood swept through the area Aug. 11. So many people watched in horror as their basements filled with water, damaging their belongings and breaking their hearts.

"I got a lot of stuff that's messed up in my basement, carpets, couches, refrigerators, a lot of my paperwork," said Joseph Barnes of Detroit, as he looked for answers at a flood assistance event.

The latest disaster to hit southeastern Michigan has thousands of people wondering if they can afford to repair or replace what's been damaged. The destruction had them pulling out their homeowner's policies, hoping they were covered. Many people found they did not have the coverage they hoped would help pay for their losses.

After the flood: Painful realization

Ferndale resident Scotty Lulianelli had a recording studio in his basement. When he came home on Aug. 11, he found guitars, equipment, and other memorabilia under 2 feet of water. After a few phone calls with his insurance agent, he found out he didn't have any coverage that would help cover the loss that he estimated at $30,000 or more.

How did he feel? "You know, ripped off a little bit," he said. Lulianelli said he thought he'd done the right things as a first-time homeowner.

He contacted an insurance agent and discussed his needs, but he says somehow he left that meeting without the coverage that would protect him during this kind of disaster.

"Next time, am I going to be in the same situation? Or are my things going to be floating around and me with my heart broke?" Lulianelli said.

What you need to know

Here are some facts you need to know about what many people call “flood insurance.”

This information should give you some key talking points as you review your existing insurance coverage, or if you're shopping for new protection.

First, when you buy homeowner's insurance, you are not buying flood insurance.

"Homeowners specifically excludes flood insurance," said insurance agent Denise Cox of Donald K. Pierce and Company Insurance in Grosse Pointe. She said there are two separate and distinct polices.

"The only time the issue of flood insurance ever comes up is if the mortgage company requires the insured to carry the insurance," Cox added. She said none of her clients carry flood insurance unless required by their lenders.

  • Working with Cox and agents at FEMA, Ruth to the Rescue has assembled these fast facts about flood insurance:
  • All flood insurance polices are backed by the federal government.
  • The government sets all rates.
  • Flood insurance never covers contents in a basement. It only covers the basement's foundation and dry wall. It does not cover carpeting, paneling, or tile.
  • Most flood insurance policies just cover the dwelling, in case the home is swept away in a flood.
  • You can purchase flood insurance for the contents of the main floor, but that will add to your premium.
  • Flood insurance will cover certain major appliances like furnaces, air conditioners, freezers, etc.
  • It will not cover stereos, televisions, furniture, or other contents.

"I would not recommend anyone finish their basement here. Just use it for storage and keep everything elevated," Cox said.

Key distinction: What’s a flood?

Flood insurance involves water coming into your home from rain, a river, a lake, or external source of water. Flood insurance does not cover water sewer backup, which is what we've seen around Metro-Detroit this time around.

"I think that they should buy the most water sewer backup coverage they can buy," said Cox. "We have a lot of basements here and a lot of people have finished basements and a lot of people keep a lot of things in their basements."

She strongly advises you to talk to you insurance agent about buying water sewer backup coverage. Cox says you can buy about $5,000 of coverage for about $80 a year. She says some customer turn down the coverage, but you should at least consider the option, especially if you keep a lot of stuff in your basement.

"I would hope the agent would bring it up, but its going to ultimately be the responsibility of the buyer," said Cox.

Three things to understand

Here are three facts you must understand about insurance protection during a flood event.

  • Just buying homeowners insurance isn't enough to protect your belongings.
  • Flood insurance covers damage caused by water coming into the dwelling. Most people don't have it, unless they live on a flood plain and are required by their mortgage to purchase the coverage. You cannot cover most of the contents in your basement with flood insurance.
  • You’ll want to consider water sewer backup coverage in Metro-Detroit, talk to your agent about that type of policy.