Flood Insurance: High Water Brings High Costs

Water is one of the most destructive forces of nature. Just a couple of inches can cause thousands of dollars in damage to your home and belongings. Just think about how much damage a few feet of water can cause. Do you need flood insurance? Will you be able to get it if you need it? You may be surprised.

Tsunami in Japan

In March 2011, a massive earthquake in Japan triggered an equally massive tsunami. The result was catastrophic loss of life and property as walls of sea water crashed ashore in parts of the country.

Shortly afterward, thousands of miles away, parts of the US West Coast, as well as Alaska and Hawaii, feared tsunami waves and the destruction they bring. The fears were warranted, as at least $40 million in damage was caused in parts of California alone.

Far Reaching Aftermath

As you can see, a natural disaster can impact areas around the world, and in more ways than one. Naturally, there are questions about how safe US coasts are from the threat of tsunamis, as well as the effectiveness of any advance warning system.

More broadly, the tsunami has many in the US rethinking flood insurance, and not just people who don't live on or anywhere near a coast. At the same time, coincidentally, US lawmakers are deciding the fate of the long-lived federal flood insurance program.

US Flood Program

First, you must realize a standard homeowners or renters policy doesn't cover flooding. You must purchase separate, special coverage for flooding.

The National Flood Insurance Program (NFIP) is a federal program making flood insurance available to people who live in areas that participate in the program. Not every state, city or town in the US participates in the program. However, the federal government sets the price insurance companies can charge anyone for flood insurance, whether or not they live in a NFIP area.

The NFIP provides flood insurance for over 5 million homeowners and businesses across the US. However, the Program is about $18 billion in debt - mostly caused by recent hurricanes like Katrina. In 2011, US lawmakers will debate how to save the Program, if it's saved at all.

The Program is set to expire in September 2011, but it's likely it will be revived, at least for a short while, just as it was revived when it expired in February 2010.

Do You Need Flood Insurance?

Of course, if you live in a flood plain or an area where floods have happened in the past, it's a good idea to get insurance. You may want insurance, too, if you live near a river or even a large creek that may flood in heavy rain.

It's important to know what flood insurance covers, though. A flood isn't just any accumulation of water. For NFIP and other insurance purposes, a flood is a general and temporary condition where two or more acres of normally dry land or two or more properties are inundated by water or mudflow.

In other words, leaks through your basement during or after a heavy rain probably aren't covered by flood insurance.

Can You Get Insurance?

Whether or not you live in an NFIP area, you can buy flood insurance. It doesn't matter if you own a home or rent, either.

As general rules, homeowners can get up to $250,000 to cover their homes; up to $100,000 for personal property in the homes. Renters can get up to $100,000 to cover their personal property. Businesses can get up to $500,000 to cover business building and their contents.

What You Can Do

If you're thinking about flood insurance, here are some tips to help you on your way:

  • Have your home and property surveyed or inspected by a professional surveyor or engineer to determine the threat of flooding, or use NFIP's flood-threat tool
  • Check to see if your area is covered by NFIP
  • Call your insurance agent and ask about adding flood coverage to your homeowner's or renter's policy
  • Act quickly. Usually, a flood insurance policy won't go into effect until after 30 days you buy it - it cuts down on insurance fraud and abuse
  • Be prepared for any emergency, including a flood, at all times
  • Contact FEMA and your insurance company as soon as possible after you suffer any flood-related damage

Unfortunately, it takes a disaster elsewhere before we stop and think about the potential threats and dangers we face ourselves. Take action now to protect you, your family and your belongings.

Questions for Your Attorney

  • Can my insurance company refuse to sell me flood insurance?
  • Doesn't my landlord's flood insurance cover my personal property?
  • Are flood insurance premiums tax deductible?
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