Flood Insurance: Frequently Asked Questions

August 2010

What Is A Flood?

The National Flood Insurance Program (NFIP) defines flood to be 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 adjacent properties (at least one of which is the policyholder's property) from: overflow of inland or tidal waters, unusual and rapid accumulation or runoff of surface waters from any source, mudflow, 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.

Does A Standard Homeowner Policy Cover Flood Damage?

No, a standard homeowner policy does not cover flood damage.  You must have a flood insurance policy to be covered for flood damage.

Is Flood Damage To My Automobile Covered?

Your car is not covered under your homeowner policy. If you have the appropriate comprehensive or collision coverages in your automobile insurance policy, your company should reimburse you for damage to your car just like any other auto claim. Check with your insurance agent.

What Is Flood Insurance?

• Flood insurance is a special policy that is federally backed by the NFIP.
• You may buy flood insurance that covers up to $250,000 for flood damage to your home. A standard flood policy will cover structural damage to your home, including damage to your furnace, water heater, air conditioner, floor surfaces (carpeting and tile) and debris clean up.
• For an additional premium, you also may buy flood coverage for up to $100,000 of damage to the contents of your home due to a flood.
• Coverage is available up to $500,000 for non-residential buildings and their contents.

How Can I Buy Flood Insurance?

You can buy NFIP flood insurance directly from your property and casualty insurance agent or insurance company if your community participates in the NFIP. You can find out if your community participates by visiting the following NFIP Web link: http://www.floodsmart.gov/floodsmart/.

Your insurance agent or insurance company also can confirm whether flood insurance is available to you and what it would cost.

Should I Make Temporary Repairs After A Flood?

Yes, to protect your property from further damage, you should make all necessary temporary repairs, such as boarding up windows and patching holes in walls or roofs, as soon as possible--even if you have not yet seen the company representative.

Listed below are some tips on making temporary repairs to your property. 

• Contact your insurance company if you need emergency money to help make temporary repairs.
• If possible, take photographs to show the way things looked before you began cleaning and making repairs.
• It is your responsibility to mitigate against the possibility of further damages. This may include contacting your utility providers (i.e. water, gas, electric) to have utilities discontinued if necessary.
• Keep all bills and receipts from repairs.
• Do not dispose of items you believe may be a complete loss until the company representative has examined them.
• Board up windows and holes in the walls or roof.
• Cover furnishings with heavy-duty plastic or tarps, or store elsewhere.
• Be sure to get prior agreement from your insurance adjuster before you contract for repairs.
• Be cautious when signing repair contracts. Deal with local, reputable contractors. Contact the Better Business Bureau or the Attorney General’s Office to check on a contractor’s reputation. Discuss payment terms before you sign any contract.
• If there is a lot of water in your home, try to get it out and ventilate your property to allow for drying.
  Clean and dry furniture, bedding, rugs, and carpet as soon as possible.
• Try to prevent metal objects (appliances, drapery rods, etc.) from rusting by drying and rubbing or spraying with oil.
• Have electrical equipment checked by a professional before use.
• Take small valuables (jewelry, silverware, etc.) to a safe place.

What Services Will Be Provided By My Insurance Company?

An adjuster from the company may come to your home and prepare a written damage estimate for the company. Be sure to get the name and telephone number of your adjuster in case you need to contact him/her or provide information to the company. You should obtain a copy of the estimate report - do not hesitate to ask questions if you don’t understand it. If you have questions or need additional assistance regarding your adjuster or company, contact the Department.

You can also hire a public adjuster to help you with a claim. Public adjusters are usually hired to help settle a complex or difficult loss negotiation with an insurance company. Generally, the public adjuster receives a percentage of the settlement reached (usually 10% of your claim). Choose a public adjuster carefully. Be sure you understand what services the public adjuster will provide and the fees he/she will charge. Illinois law requires public adjusters to be licensed with the Department of Insurance. Contact the Department to verify a public adjuster’s license.

How Does The Claims Process Work?

The claim process may begin in one of two ways: your insurance company may send a claim form, known as a “proof of loss form,” for you to complete; or a claims adjuster may contact you before you are asked to fill out any forms. A claims adjuster is a person who is professionally trained to assess the damage. He/she may be a company employee or work under contract with the company.

Your policy divides your claim in two separate parts – one for the house itself and one for the personal property or contents. You may also be entitled to reimbursement for additional living expenses. The check or draft payment for the contents will be made out to you. However, the check or draft for the house may be payable to you and your mortgage holder if there is a mortgage on your house.

You may receive an advance check immediately after the disaster to cover such items as additional living expenses and clothing. It is important for you to keep receipts for all items purchased with this money because when the claim is finally settled, these expenses will be deducted. For example, clothing and personal property receipts will be deducted from the amount allowed for contents; living expenses (i.e. motel bills or temporary housing expenses) will be deducted from the amount allowed for additional living expenses.

What Should I Do If My Home Appears To Be Damaged?

Obviously, you should not endanger yourself or your family. If your home appears to be unsafe to live in, report this fact to the insurance company and reside elsewhere. You should make a list of all structural damage to property that you want to bring to the adjuster’s attention. If the company representative agrees the house is structurally unsafe, the company may hire a structural engineer to inspect your home. Your insurance provider may pay for the inspections.

However, if you and your contractor cannot agree with the company’s determination, you may have to pay the costs of a mutually agreed upon structural engineer to inspect the house. If possible, get written bids from reliable, licensed contractors. The bids should include details of the materials to be used and prices on a line-by-line basis. This information should make the claim process faster and easier.

If the structural engineer determines that the dwelling is repairable, the insurance company is obligated only for the repairs. If the dwelling is not repairable, the company will adjust your claim in accordance with your policy limits and will reimburse you for the cost of the inspections.

Will My Damaged Personal Property Be Replaced?

The type of policy you have will determine the replacement of household contents and other personal property. Most insurance policies pay the actual cash value – an amount equal to what the items were actually worth at the time they were damaged or destroyed. For example, it might cost $1,000 to replace your sofa at today’s prices. If the average useful life of a sofa is 20 years, and your sofa was 10 years old on the day it was destroyed, the company would pay you $500.

If you paid an extra premium for replacement cost coverage on your personal contents, the company will first pay you the actual cash value as described above. Once you have actually replaced the items and submitted your receipts, the company will then pay you for the difference. Using the above example, the company would initially pay you only $500 for your damaged sofa. After you buy the new one for $1,000, the company would then reimburse you another $500 – the difference between the actual cash value and the replacement cost. Some companies also use replacement services that will locate certain items, such as appliances, for you.

As you begin replacing damaged items, be sure to keep all receipts. It may be advisable to submit accumulated receipts to the company every two weeks or so, rather than sending them in one at a time. Most policies require that you replace the contents within a specified time period from the date of loss. If you cannot meet this time period, ask your company representative for an extension. You can also submit a claim for storage costs that you incur until your home is ready for occupancy.

How much should I expect to receive for damage to my home?

Repair or replacement of your home will depend on the type of policy you have. If your policy pays actual cash value, the company will pay the cost to repair or rebuild your house minus depreciation. Companies use many different factors to determine how much to deduct for depreciation, but with an actual cash value policy, you should not expect to be reimbursed for the full amount of repairs.

Replacement Cost Policy

If you purchased a replacement cost policy, and have met the company’s “insurance to value” requirement (the actual cost in today’s market to replace your home), the company will first pay you the “actual cash value” as described above. Once the actual repair or rebuilding is completed, the company will then pay you the difference up to the policy limits. If you choose not to repair or rebuild, the company is obligated to pay you only the actual cash value. Many policies require you to rebuild at the same location, but you may be able to negotiate this requirement with the company representative.

Guaranteed Replacement Cost Policy

If you purchased a guaranteed replacement cost policy, and have met the company’s “insurance to value” requirement (the actual cost in today’s market to replace your home), the company will pay the full cost to repair or rebuild your house, even if it is more than your policy limits. For example, if your policy limits are $100,000 and it costs $120,000 to rebuild your house, the company would pay the entire $120,000 under this type of policy. Some companies will only pay a certain percentage above your policy’s limit (e.g. 25%).

If your home costs more to repair/rebuild than your policy allows, you may want to ask representatives at the local disaster application center or the toll free disaster tele-registration hotline if you are eligible for financial assistance.

What Should I Consider When Choosing A Contractor To Repair My Home?

Be cautious when hiring a contractor – make sure you are hiring someone reputable. Here are some things to consider when looking for a contractor:

• Hire a local contractor. Deal only with established firms or individuals who can provide references and are willing to give you a signed contract.
• Check with the local disaster application center, your local building code department or the Better Business Bureau for guidance.
• Don’t rush into signing a contract. Collect a number of estimates for the job.
• Obtain written estimates before repairs begin.
• Do not sign contracts for major repairs until your insurance company representative has determined how much damage there is and how much the company will pay.

Payment arrangements with your contractor should be handled carefully. Here are some things to consider regarding payment:

• If the repair work is extensive, the contractor may ask for periodic partial payments as the work progresses, but it is highly unlikely that a reputable contractor would request full payment in advance.
• The contract should specify that payments be made as the work is completed.
• If you have a mortgage on your home, the lending institution may also have specific requirements about how the insurance funds are expended.
• If there is a discrepancy over the cost of repairs or the contractor has found hidden damage, you should first contact the insurance company representative and try to resolve the difference. If you are still unable to resolve your differences, contact the Department of Insurance at one of the numbers listed at the bottom of this fact sheet.

Where Can I Live While My House Is Being Repaired?

Ask your company representative if you are insured for “Additional Living Expenses.” This coverage will pay for costs you incur that exceed your normal living expenses. For example, if you normally spend $1500 per month for mortgage/rent, utilities, food, and transportation, and these living expenses increase to $2000 per month because of the disaster, the insurance company will reimburse you $500. Be sure to save all receipts.

You should also ask your company representative if there are any restrictions on amounts allowed for hotel rooms. If you stay with a relative or friend, the company may require proof of actual payments to reimburse your host for lodging. Extra expenses, such as higher utility bills, incurred by your host would definitely be considered.

What Can I Do If I Don’t Have Flood Insurance?

You should ask the representatives at the local disaster application center or the toll free disaster tele-registration hotline if you are eligible for financial assistance.

For More Information

Call our Consumer Services Section at (312) 814-2427 or Our Consumer Assistance Hotline Toll Free at (866) 445-5364 Or visit us on our website at http://insurance.illinois.gov