What a mess. In 2010, Patrick Dorrian and thousands of others in central Iowa found out the hard way that homeowners insurance did not cover flood damage. When floods ravaged the state in August, homeowners were forced to pay for the cleanup themselves. In Dorrian's case, not only did water inundate his house, but the neighborhood's storm and sanitary sewer system backed up into everyone's basement [source: KCCI].
Most standard insurance policies cover water damage from bursting pipes and leaky faucets. They also cover water damage when a storm rips a hole in the roof allowing the rain to fall in. However, policies do not cover flood damage when a river overflows its bank, or surface water of any sort, runs into the house.
Instead, homeowners need special flood insurance provided by the National Flood Insurance Program [source: Patel]. Yet, many people never buy flood insurance because they don't live in a high-risk area. When flash floods ripped houses from their foundation and decimated the downtowns of many Vermont communities in 2011, only 3,673 homeowners had flood insurance policies [source: Jewell]. The Insurance Information Institute found that in 2011, just 14 percent of U.S. homeowners had flood insurance [source: Bradenton Herald].