Flooding is the most common natural disaster in the country. It’s a phenomenon that people 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 2006, resulting in the state’s worst floods since the 1930s, closing schools and businesses and making homes uninhabitable.
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.
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.
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.
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: