Does a flood policy pay for indirect losses?

Flood insurance policies, such as those offered through the National Flood Insurance Program (NFIP), are designed primarily to cover direct physical loss or damage to insured property resulting from flooding. This direct coverage includes damages to structures and contents caused by floods.

Indirect losses, which might include lost business income due to a flood or additional living expenses incurred when a home is uninhabitable, are not covered under standard flood policies. The intention of flood insurance is explicitly focused on the immediate and tangible impact of flooding rather than the secondary effects that can arise afterward. This distinction is crucial for policyholders to understand when evaluating their coverage needs, as they may need to seek additional types of insurance or coverage options to protect against indirect losses.

Recognizing this, the choice indicating that flood insurance does not pay for indirect losses accurately reflects the limitations of coverage provided by these policies.