As well as the usual variations between insurers, there are significant differences between the limitations that apply to different types of flood insurance coverage. There are, however, some common patterns. As a general rule, universal limitations detail what is physically covered, while the different types of insurance vary in the financial details.
The most fundamental exclusion comes in the fact that there are two components to flood insurance coverage, buildings and personal property. Both can be bought separately, with buildings coverage usually being for a higher amount and sometimes being a mandatory requirement for mortgages. The National Flood Insurance Program recommends all homeowners take out both types of insurance.
Another classification of flood policies is preferred risk vs. standard stated rate. Preferred risk policies are only available in areas rates as having less than a one percent chance of suffering significant flooding during a one-year period. These polices usually carry lower premiums than standard stated rate polices.
There are two main advantages to the standard stated rate variant of flood insurance coverage. One is that such policies allow the option of only covering personal possessions, while preferred risk policies just allow the option of buildings-only, or buildings-and-personal combined. The other advantage is that, unlike preferred risk policies, some standard state rate policies work on a replacement cost settlement basis. This means that as long as the policyholder took out the maximum coverage level available, the insurer will pay out the actual cost of the claim, even if it exceeds the coverage maximum.
There are some exclusions that apply to most policies, regardless of which type of flood insurance coverage they offer. For example, policies usually don't pay for damage to possessions kept outside the building, to vehicles, or to precious metals and valuable paper documents. In most cases, a policy won't pay for damage caused by avoidable mold or mildew rather than a flood. And policies usually don't cover the costs of temporary housing or losses caused to a home-based business.
Flood insurance cover will usually also limit what is covered in areas that are either below the ground, or are on the ground level but fully enclosed. In such areas, most personal property is excluded from coverage, though washers, dryers and freezers may be covered. There are often usually exclusions for carpeting and bookcases in such areas.
