Flood vs water damage: the question that decides your insurance claim

Whether your insurance covers water damage depends on one question: where did the water come from? Surface water from outside is flood — and flood is excluded from standard home and business policies. Water from a broken pipe inside your property is a covered peril. That distinction changes everything.

The San Carlos Flood That Hit One of Our Clients

Just a couple years ago here in San Carlos, Walgreens and Trader Joe's — within a thousand feet of my office — had their parking lots flooded. The drains along El Camino Real got blocked up. Water was everywhere.

We insure a beauty salon on Arroyo here in San Carlos. It's a good hundred feet off El Camino Real and not too far from the creek. The beauty salon got flooded.

Across the street we also insure a transmission shop. We insure the building, and the lender required the transmission shop to buy flood insurance because the creek is right next to it.

The beauty salon? No flood policy.

Guess which one had coverage when the water came.

The One Question That Determines Your Claim

Consumers sometimes will say, "I got flooded," and we have to ask them: "Where did the water come from?"

That one question determines your entire claim.

The Rule: Outside Water vs. Inside Water

Surface water from outside = flood (NOT covered by standard policies)

Your backyard fills up with water and it comes under the doorway into your home — that's flood.

A creek overflows and water reaches your business — that's flood.

A parking lot turns into a lake and it seeps into your building — flood.

Flood is an excluded peril on a standard insurance policy. Whether it's commercial or residential, your standard policy does not cover surface water. Period.

The only way to have flood coverage is to buy a separate flood policy — either through FEMA's National Flood Insurance Program (NFIP) or a private flood carrier.

Water from inside your property = covered peril

Your pipe breaks inside your wall and water damages your floors, your cabinets, your furniture — that is not flood. That's water damage from an internal source, and it IS covered on your standard policy.

Your water heater bursts in the garage and floods the house — covered.

A toilet supply line breaks on the second floor and water leaks through the ceiling — covered.

The water came from inside your property, from your own plumbing. That's not flood. That's a covered water loss.

Why This Matters on the Peninsula

Here on the Peninsula we get both situations regularly. We've got creeks running through San Carlos, Redwood City, and Belmont. We've got hillside runoff in the wet season. We've got aging storm drains that back up.

If the water came from outside — from the ground, from a creek, from the street — you need a flood policy to be covered.

If the water came from a broken pipe or failed appliance inside your property — your standard homeowners or commercial policy should cover it.

Key Takeaways

Standard home and business policies do not cover flood. Flood is defined as surface water from outside your property — creek overflow, storm surge, backed-up drains, rising groundwater.

Internal water damage IS typically covered. Burst pipes, failed appliances, and broken supply lines are covered perils on standard policies.

The deciding question is always: where did the water come from? Outside = flood (excluded). Inside = water damage (covered).

A separate flood policy is the only way to cover surface water. Available through FEMA's NFIP or private flood carriers.

If you're near a creek, a flood zone, or a low-lying area — get a flood policy. Don't wait for the next big rain to find out you don't have one.

What I Tell Clients

If you're anywhere near a creek, a flood zone, or even a low-lying area that collects water in a big rain — talk to your agent about a flood policy. It's a simple question with a simple answer. Don't be the beauty salon.

Paul Nadler has been a licensed insurance broker in California since 1976. He is the third-generation owner of Nadler Insurance in San Carlos. Ask about flood coverage →

Flood vs. Water Damage: Where Did the Water Come From?