There was a great deal of press coverage after Hurricane Katrina in 2005 regarding lawsuits against insurance companies for damage not covered. Approximately two-thirds of homeowners and three-quarters of businesses were not covered for losses covered by flooding. This is a staggering amount.

Why weren’t they covered? Well, since 1968 flood damage has not been included in standard coverage policies. This disaster showed how important it is to have an all-peril policy.

Most homeowners mistakenly believe that their policy covers them for a wide variety of disasters and damage. One-third of participants in an NAIC survey believed that they were covered in event of a flood when they were not.

This lack of knowledge is alarming seeing as how in the U.S. every year, the average estimated costs for damage from flooding is more than $2.4 billion. This is according to the National Flood Insurance Program.

Consumers and insurers can both be blamed for this problem. The homeowner does not read their insurance policy because it is a very long document with heavy wording that is often not easily understood. The insurance companies are very reluctant to change this however as they have proven to be written in such a way that protects them from litigation.

But this does not mean that homeowners are completely helpless should they be victims of flooding. Flood coverage is provided by National Flood Insurance Program and can be purchased separately from homeowner’s insurance. Consumers must also purchase separate coverage for earthquakes and damage from mould.

Everybody is at flood risk in the U.S. It only depends on the level risk for the area in which you live. As a result, it’s very important that homeowner’s take the time to ask questions of their insurance company to ensure that they are getting the coverage they need on their homeowner’s insurance policy.