Why floods and mudslides create a challenge when it comes to insurance

Flooding and mudslides pose unique challenges for homeowners when it comes to insurance. Many find out they are either underinsured or have no coverage at all, despite having homeowner's insurance.

Water is water, but not when it comes to homeowner's insurance.

"We have to try and understand the difference between water damage and flood damage and the easiest way to do it is if the water is coming from above down, it's usually water damage. That would usually be covered under your homeowner's policy," said insurance expert Karl Susman. "If it's water that's coming up or it's rushing under your front door, it is starting down, then that's usually going to be something that would be covered under a flood insurance policy."

The two are not one and the same. Homeowners must have a separate policy to cover flood and mudslide damage.

"You can get a flood-insurance policy from FEMA, right, through the National Flood Insurance Program and there are private companies that offer their own flood insurance, and they can be a fraction of the cost of what FEMA's policy is," Susman said.

Susman said the greater the flood risk to your property, the higher your premium will be.

Susman explained that even if there's a bad storm and a home is flooded from the oversaturated ground, or a slide comes through, it would almost not ever be covered under the policy. He said it's because the water is initially coming from the slide, but it's not directly entering the home that way.

In 2023, flood insurance claims soared more than 200% in California, according to the National Flood Insurance Plan. Data from the Public Policy Institute of California found that more than 7 million residents live in areas at risk of flooding, but fewer than 25% of those households carry flood insurance.

"I think most people assume that if they have a homeowner's policy, they have coverage, whether it be for a fire, for earthquake, for flood, they just have it and they don't," Susman said. "I think that a little bit of education goes a long way."

Just because you weren't required to purchase flood insurance to get a home loan doesn't mean you don't need it. FEMA data shows that one in three floods occurs in areas considered low- to moderate-risk.

The average cost of flood insurance in Los Angeles is a little over $1,000 a year, or $94 a month, according to a recent study by Lending Tree.