Home insurance companies are offering a new water endorsement for homes across the country.
In this article, we're going to talk about the dangers of using these water endorsements as a replacement for flood insurance. We're going to cover important things to know about these insurance products, and we're going to show you how you could lose your home if you have either of these insurance products.
Water Endorsement Dangers
Now, it seems that this new water endorsement from your homeowner's insurance policy might be the best deal since it will help you avoid getting another policy just for flood damage. However, one of the biggest dangers of using this as a replacement for flood insurance is coverage.
Let's do a quick review first of what flood insurance offers for your protection against flood damage.
First, let's define what flooding is. This is when at least 2 acres or 2 properties are inundated by water. This may be due to heavy rain, overflow of rivers or any body of water, or snowmelt. This is the same rule that flood insurance follows.
If you go through federal flood insurance and the National Flood Insurance Program (NFIP) under the Federal Emergency Management Agency (FEMA), you will be able to get at most $250,000 for building coverage with a maximum of $100,000 for contents or personal property inside that home.
On the other hand, this water endorsement will generally cover ten to fifteen percent (10% - 15%) of what a standard flood policy offers. This means that you're only going to get around $20,000 to $30,000 for flood coverage.
Although it follows the same rules of what is considered a flood, since different homes have different prices, this may present some benefits or potential disadvantages. Depending on your insurance provider, this amount may have the same limits as your sewer or drainage backup up to the dwelling limit.
As much as this water endorsement may be beneficial for you, it may not be able to really address the coverage needs you may have when it comes to flooding. Generally, this amount may not be able to fully cover the replacement costs of your home.
It's also important to note that, unlike flood insurance services, water endorsement won't be able to cover all of your property that's been affected by flooding. This is especially true if you're living on a property in a high-risk flood area or near a body of water where flooding can happen drastically in a short period of time.
This coverage may only cover your basement and the first floor however anything past that might not be part of your coverage.
You might be thinking of saving more of your money by canceling your flood insurance and using water endorsement as your flood protection. We generally discourage this since it also presents a danger when it comes to your insurance coverage.
Water endorsement availability also depends on your insurer as there may be insurance providers that don't have this type of additional coverage.
Generally, by doing this it may also mean that if your homeowner's insurance is nonrenewed, it will take your flood coverage with it. Once your homeowner's insurance is canceled or nonrenewed by your insurance company, you might not be able to get this water endorsement from a different insurance provider since it's basically embedded with the policy.
This is a different case with flood insurance being a separate policy that won't really be impacted if such that situation happens.
This water coverage is not going to be easily acquired too. This is because your mortgage lender or bank will likely be the one to determine if the policy limits of this new water endorsement will be enough for your home. Simply put, if your bank will not accept this coverage, you might still need to get a separate flood insurance policy.
How Flood Insurance Helps
This new water endorsement may not really be able to give full coverage unlike a separate policy like flood insurance. So relying everything on your homeowner's policy may not be the best line of defense as a property owner for property damage due to floods.
Although it may be risky to rely your flood protection on water endorsements solely, it may also be of great help if you combine it with an existing flood insurance policy. This could mean that you can go past certain policy limits of flood insurance coverage by using water endorsement from your homeowner's insurance policy as excess flood insurance.
You may also find more comfort and security by knowing that you can get around $270,000 just for building coverage alone with the water endorsement and your standard flood policy coverages combined.
At the end of the day, you shouldn't settle for less when it comes to the protection of your property and investment. Floods can happen anytime and most times, even just an inch of flood can cost thousands of dollars in property damage.
If you've got questions regarding this new endorsement with homeowners policies, how flood insurance premiums are determined, or anything related to flood insurance, click below to access our flood learning center.
Ready to solve your flood insurance problems? Here are the steps you can take:
- Talk with our flood education specialist.
- Get back to the important things in your life.