Flood Insurance

A flood insurance policy is a specialized form of homeowner's policy designed to cover damage to property caused by a flood, which would be considered an act of God and thus excluded from a traditional homeowner's policy.

Typically specialized insurance policies of this nature carry higher deductibles and higher premiums in contravention of the traditional insurance wisdom that high deductibles lower the cost of maintaining a policy. Essentially this factor of higher expense is due to the high level of risk attached to the events covered by a specialty policy.

Given regions of the United States are more susceptible to the so-called acts of God for which these policies were designed, such as the Tornado Alley of the Midwest and the hurricane prone regions of the Gulf Coast. Without specialized policies, however, homeowners in these regions face a situation in which they could lose their homes and possessions to natural disaster with no insurance compensations whatsoever.

More Terms Explained