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Get Your Home a Flood Insurance Checkup

Reexamine your risk for flood damage

By Broderick Perkins

December 1, 2008

Natural Disasters • Get Your Home a Flood Insurance Checkup • Dealing with Disasters: Financial Preparation is Vital • Storm-Tossed Texans Warned to Watch for Price-Gouging • Digital TV Transition Threatens Portables • Storm Season is Time to Review Insurance Policies • Scammers Exploit Iowa's Flooding • Post-Storm Survival Tips • Midwest Storm Victims May be Victimized Again • Fireman's Fund Offers 'Green' Policy • California Gears Up For Fire Scammers • California Wildfires Aftermath Requires Vigilance • Insurers Dumping Customers Along East Coast • Homeowners Insurance Rates Unfair, Massachusetts Charges • Researchers: La Nina Won't Affect 2006 Atlantic Hurricanes • 2006 Hurricane Forecast: More and Bigger • Few Americans Prepared For Disaster • Illinois Earthquake Rattles Insurers • Consumers Pay the Price for Disasters: Tips on Minimizing Your Losses • Congress Considers Taxpayer-Funded Catastrophe Insurance • Researchers Study East Coast Tsunami Danger • Is the Earth Getting Riskier? Expert Says No • One-Third of U.S. Population Lives in Hazard-Prone Areas • FEMA Tightens Flood Insurance Standards • Preparing Your Home for a Storm • Keeping Food Safe During an Emergency • Hurricane Season Is Time to Review Insurance Coverage • Tremors Rattle Californians

It's time to reexamine your risk for flood damage and the need for flood insurance.

With a warmer planet facing more incidents of larger storms, this winter could be a wet one that opens the floodgates, especially in the West North Central U.S. where precipitation levels are already above normal.

Flood insurance is only mandated for properties in high-risk flood zones, but even if you live in a low- or moderate-risk area, you should bone up on the National Flood Insurance Program (NFIP).

That's because floods are the most common natural disaster in the U.S. If you live in a flood plain, your home has a 26 percent chance (more than one in four) of being damaged by a flood during the course of a 30-year mortgage, compared to a 9 percent chance (less than one in ten) for fire damage.

To help get you started, here's a quick primer on floods and flood insurance to help you determine if you need the coverage when it's not mandated:

• Residential NFIP coverage provides up to $250,000 of insurance to protect your owner-occupied home and up to $100,000 to protect your belongings. In a high-risk area, federally insured or regulated lenders will require you to have flood insurance for the amount remaining on your mortgage, or $250,000, whichever is lower. Renters can get up to $100,000 coverage for the contents of their home.

• If you aren't required to have flood insurance and choose not to buy it, it's a good idea to have as much as $20,000 socked away for self-insurance. For just one inch of water in your home, expect an estimated $8,000 in damages, according to the NFIP's "Cost of Flooding" estimator. A foot of water -12 inches -- will cost you nearly $19,000.

• Your regular homeowners insurance policy typically does not provide benefits for losses caused by a flood, yet the NFIP says one in four flood insurance claims come from areas with low-to-moderate flood risk. That means too few homeowners carry the coverage.

• The level of claims from low-to-moderate flood risk zones is high because, while everyone does not live in a flood plain, everyone does lives in a flood zone, says the NFIP.

If you live in a low- to moderate-risk area made so by a system of levees, dams and dikes -- as Midwestern and Gulf of Mexico area residents quickly learned earlier this year -- the flood risk may be reduced but it is not removed. Levees, dams and dikes are not impervious to nature's worst.

Flooding can be caused by heavy rains, melting snow, inadequate drainage systems, failed flood control structures and tropical storms and hurricanes. Even if you have a hillside home and you think you are above harm's way, there's a risk of mudslide or debris flow. Both are covered by flood insurance.

The share of claims from low- to moderate-risk homes and the overall risk for flooding could increase. A recent U.S. Climate Change Science Program report "Weather and Climate Extremes in a Changing Climate" said flatly, global warming-spawned climate change is increasing the intensity, duration, frequency, and geographic extent of weather events.

For example, 15 years ago, after the Midwest was previously inundated by what was pronounced a "100-year" or a "500-year" flood, some residents believed they'd seen the worse and dropped coverage.

This summer, many uninsured homeowners got soaked.

The term "100-year" flood doesn't mean there's a major flood every 100 years. It means a 100-year flood would have a 1 percent chance of occurring again in any given year and a 500-year flood a 0.2 percent chance.

Cost isn't necessarily a factor in non high-risk areas. You can qualify for the Preferred Risk Policy that provides contents coverage beginning at $39 per year and building plus contents coverage beginning at $119 a year, according to the NFIP.

If the relatively small premium doesn't get you to at least learn more about flood insurance, keep in mind, if you don't move fast you could lose. Once you decide to buy flood insurance, there's a standard 30-day waiting period, from the date of purchase, before a new flood policy goes into effect.

There is no waiting period provided if the following circumstances are met:

• The initial purchase of flood insurance is in connection with the making, increasing, extension, or renewal of a loan in a high-risk zone by a regulated lender.

• The initial purchase of flood insurance occurs within one year of a flood zone map change.

However, you could have to wait even longer for other flood-related coverage. After severe storms earlier this year, insurers in the Midwest established moratoriums on sewer and drainage coverage, which is part of your homeowner's policy, but can protect you from flood induced sewer and drainage problems. Moratoriums on selling disaster-related insurance coverage are very common following a disaster.

For more information, visit the consumer-friendly NFIP web site at FloodSmart.gov.

Also see the Federal Emergency Management Agency's (FEMA) flood information Web site and FEMA's NFIP Web site.

Forewarned is forearmed.

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Broderick Perkins parlayed 30 years of old-school journalism into a digital real estate news service, the DeadlineNews Group, offering "News that really hits home!"™. The Silicon Valley bootstrap includes the Web site DeadlineNews.Com and the back shop Deadline Newsroom. Contact him at news@deadlinenews.com.

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