Is flood damage covered by car insurance?

With all the flood damage this year around Houston and southern Florida, many people are wondering if their car insurance will cover the damage caused by the flood waters. It’s estimated the over 1 million vehicles alone in Houston will be a total loss, so car insurance for flood damage is a very popular topic.

Auto insurance is made up of liability insurance, which pays for damages you incur to other vehicles, people, or objects in an accident, and physical damage coverage, which pays to repair damages to your own vehicle.

Physical damage coverage consists of comprehensive or other-than-collision (OTC) coverage and collision coverage. Collision pays when you upset your car or have an impact with another vehicle or object. OTC coverage kicks in for the following perils:

1. Missiles or falling objects
2. Fire
3. Theft or larceny
4. Explosion or earthquake
5. Windstorm
6. Hail, water or flood
7. Malicious mischief or vandalism
8. Riot or civil commotion
9. Contact with bird or animal
10. Breakage of glass

Peril #6 on the list covers damages to your vehicle caused by flooding, so your auto insurance policy will cover damages under the OTC or comprehensive coverage.

When you purchase physical damage coverage, you also choose a deductible amount, which must be paid by you prior to your insurance company covering a claim. Common deductibles range from $250 to $1,000, but some policies allow both higher and lower amounts.

If the damage to your flooded vehicle is repairable, you will pay the deductible and your insurance company will pay the remainder of the repair cost. If your vehicle is a total loss, which is common with flood damage, your company will make a settlment offer based on the market value of the vehicle, or Actual Cash Value (ACV), prior to the damage. Any settlement that is made will be less your deductible.

So for example, let’s say you own a 2012 Ford F-150 pickup and the fair market value is approximately $23,000. It was flooded in five feet of flood water and you have a $1,000 deductible for OTC coverage on your policy.

Your insurance company will declare the vehicle a total loss, and present you with a settlement offer. If you agree to the insurance company’s settlement offer of $23,000, you will receive a check in the amount of $22,000.

If you do not agree to their offer, you have the right to challenge their settlement offer by presenting any information that substantiates a higher settlement. For example, the ACV of vehicles is based on comparable values of vehicles in the market, but if your truck had only 30,000 miles, it would be valued higher than comparable models for that year.

Most people are put in a tough spot after a total loss because they need to get another vehicle to replace the one that was destroyed. And the only way they can do that is to have the settlement check from the insurance company. But what people do not realize is that they can accept the initial settlement from the company, and then protest the valuation.

This gives insureds the funding they need to purchase a different vehicle, but they can continue arguing for a fair settlement.

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Case Studies: Car Insurance Coverage for Flood Damage

Case Study 1: John’s Hail Damage

John’s car was severely damaged by a hailstorm. He had comprehensive coverage with a $500 deductible. The cost of repairs exceeded the car’s value, resulting in a total loss. John received a settlement check of $9,000 after deducting the deductible.

Case Study 2: Sarah’s Theft Incident

Sarah’s vehicle was stolen and later recovered with significant damage. She had comprehensive coverage with a $1,000 deductible. The insurance company declared her car a total loss and offered a settlement of $12,000. After deducting the deductible, Sarah received $11,000 to assist in purchasing a replacement vehicle.

Case Study 3: Mark’s Vandalism Claim

Mark’s car was vandalized, causing extensive damage. He had comprehensive coverage with a $250 deductible. The repairs exceeded the car’s value, resulting in a total loss. Mark received a settlement check of $7,500 after deducting the deductible.