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Flooding
is the most common natural disaster in the country. It's a
phenomenon that many of us have come to associate with states
along the Gulf Coast, since year after year we see images of
beachfront homes battered by storms. As bad as those images
are, some of the most damaging floods that follow hurricanes
occur hundreds of miles inland. And well north of the
Gulf Coast region, residents of Massachusetts,
New Hampshire and
southern Maine were hit with record-breaking rainfall in
mid-May, resulting in the state's worst floods since the
1930s, closing schools and businesses and making homes
inhabitable.
Still, not all water-related disasters can
be blamed on nature. A flood doesn't always mean heavy
rainfall and overflowing rivers rushing through the streets
and into homes. New land development projects sometimes lead
to flooding if the construction alters the natural runoff
pattern, making it hard for the ground to absorb water. In
other words, floods can happen almost anywhere, to anyone.
In spite of the common occurrence, a typical
homeowner’s policy does not include coverage for flood damage.
That’s why it’s wise to get additional federally backed
insurance coverage. In fact, if your mortgage is backed by the
federal government, or if your home is located in a high-risk
zone, you are probably required to have flood
insurance.
For those who live in areas susceptible to
hurricanes and other storms, the time to act is immediately.
Hurricane season begins June 1st, and a flood policy takes 30
days to kick in.
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Who Should
Buy
Flood
Insurance? |
Certainly,
anyone whose home includes plumbing is vulnerable to water
damage and should consider flood insurance. In fact, the
Federal Emergency Management Agency (FEMA) warns that
everyone can suffer losses from floods.
The need for
flood insurance is even more real for homeowners who live in
flood plains without failsafe controls, such as dams. Many
people mistakenly believe they will be covered by federal aid
in the event of a flood caused by nature. That’s only true if
the area is declared a federal disaster area by the President,
which is a condition that occurs in less than 10 percent of
all weather emergencies. The good news is, a presidential
declaration is not required in order for a flood policy to pay
off — making coverage invaluable.
Even if you do
receive federal money to repair damage to your home, you
should know these funds are generally a loan, not a grant, and
have to be paid back with interest.
Here's an example
of the difference insurance can make: A $50,000 FEMA loan at
four percent for 30 years will result in a payment of around
$240 per month, or $2,880 per year. On the other hand, a flood
insurance policy that provides $100,000 in protection may cost
you only $33 per month, or roughly $400 per year. The bottom
line is, if you want to be sure you can recover financially
after a flood, you need to provide your own
protection.
Like any
policy, you can purchase various levels of coverage. But a
standard flood policy includes: structural damage; furnace,
water heater, and air conditioner; flood debris clean up; and
flooring, such as tile and carpeting. You can also step-up a
policy to cover the contents of your home, such as furniture,
jewelry, and clothing.
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Where Can You
Buy Coverage? | Not
all homes qualify for coverage. For instance, flood insurance
for beachfront or ocean-side property may not be available for
the obvious reasons.
FEMA reports that more than 19,000
communities have agreed to tighter zoning and building
measures to control floods. That means residents of these
communities can buy coverage from the National Flood Insurance
Program (NFIP), which currently protects the interests of 4.4
million flood policyholders nationwide.
More than 200
private-sector insurance companies write and service flood
insurance policies, under the umbrella of the NFIP, which is
backed by the federal government and overseen by FEMA. The
funds to support these policies are not taxpayer dollars, but
paid for by the premiums collected from flood insurance
customers. Check the NFIP Web site to learn whether your
community is a participant.
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How Expensive
is
Flood
Insurance? | Premiums
for flood insurance vary widely, depending on individual risk.
In determining price, flood insurance underwriters consider
several factors including the property's elevation, proximity
to bodies of water, and whether the dwelling has a basement.
The average flood insurance policy premium costs around $500
per year, according to FEMA, with deductibles ranging from
$500 to $5,000. For homes in a low-to-moderate risk area, an
annual premium may be as low as $112.
Cities may
participate in a Community Rating System in order to secure
discounted flood insurance rates for residents. This involves
a voluntary program that encourages floodplain management
activities that reduce the likelihood of losses, increase
awareness of flood insurance, and facilitate accurate rating
of the area. Ask your agent if your community is a Community
Rating System participant. Here is a list of other questions
to ask:
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Questions to Ask Your Flood
Insurance Agent
(Source:
FloodSmart.gov) |
Answer |
| Does my community
participate in the National Flood Insurance
Program? |
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| Which flood
zone do I live in? |
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| Does my
community participate in a Community Rating
System? |
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| If
so, what is my community's CRS rating and do I qualify
for a CRS rating discount? |
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| What exactly
will be covered in case of flood damage? |
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| How much
will it cost to purchase coverage for my building and
contents and how do I determine which level to choose,
appropriate to my risk? |
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| How will my
premium cost change if I choose a higher or lower
deductible? |
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| Are there
any hidden expenses I should be aware of? |
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Each year, the U.S. suffers $2 billion in
property damages from
flooding.