Will my NFIP or FEMA flood insurance pay out in Alabama?
It's a question we get from property owners in Birmingham, Tuscaloosa, Montgomery, Anniston, and Huntsville Alabama everyday.
What is a Flood?
We are specifically looking at what the National Flood Insurance Program or NFIP and how they define a flood. In regards to private flood insurance in Alabama they normally follow the same guidelines for defining what is considered a flood.
According the NFIP manual a flood is defined as a normal dry area that is inundated with water. It specifically states that it must be 2 acres or 2 parcels.
When taking out a flood insurance policy many property owners are confused about coverages. They also are confused about what the real risk of flooding exist.
Growing up in Birmingham Alabama I can tell you the flood threat exists across Alabama. I remember watching the Vestavia bowling alley parking lot flood every time it rains. Flood damage in these areas was very common but many times not filed as a flood insurance claims.
This occurred many times as flash flooding in the area. Many areas like South Shades Creek or the Cahaba River could rise quickly.
After the 2019 flooding in Alabama some people on Lake Logan Martin were surprised to find out they didn't have flood insurance coverage for things like docks.
Whether you live in a low risk, moderate risk, or high risk flood zone it's important to know if your flood insurance policy will actually pay out on a claim.
It's important to know that generally most homeowners insurance policies will not cover flood.
So what exactly does FEMA or NFIP consider a parcel? According to the NFIP manual a parcel can be considered a roadway if it touches another property. This is important to understand if your home is the only building flooded. You want to make sure flood coverage you pay for would actually pay out.
So if coverages do pay out after a flood in Alabama what does flood insurance cover? It depends if you have a private flood insurance policy or an NFIP policy. Coverages provided can be different. Let's look at coverages that can be provided on an NFIP flood insurance policy.
- Building coverage
- Contents coverage (Personal property)
Depending on what coverages you select flood insurance costs could range and you could end up with affordable flood insurance. NFIP offers up to $250,000 on residential buildings and up to $100,000 on contents coverage.
Just because policies have a certain amount of coverage does not mean you would receive that on a flood insurance claim.
NFIP has an 80% rule when paying out claims. This means in order to have replacement cost on the building in Alabama you have to insure for 80% of replacement cost or get the max amount of building coverage through the National Flood Insurance Program. Many private flood insurance companies also have this guideline.
We have actually seen some private flood insurance companies require 90% of the replacement cost and not look at the max amount of coverage available.
Contents coverage on flood insurance policies work a little bit differently in Alabama. If doing a flood policy through the National Flood Insurance Program these are written on an actual cash value basis.