If you own a home in a documented flood zone, there's a 26 percent
chance of experiencing a flood over the course of a 30-year mortgage. And
while they are more common in some areas, floods can happen anywhere. In
fact, 35 percent of all flood insurance claims each year come from property
outside of high-risk areas.
You should also know that flood damage
is specifically excluded from all
basic homeowner's policies. Fortunately, you can purchase a separate Federal
Flood Insurance policy through one of many private insurance companies that
write and service the policies for the government.
Flooding
is the temporary inundation of normally dry land caused by the
overflow of inland or tidal waters, the unusual or rapid accumulation or
runoff of surface waters, or mudslides caused by flooding. Floods can result
from storms, hurricanes, melting snow, dam or levee failure, or even
inadequate drainage. According to the National Flood Insurance Program
(NFIP), a wet situation is considered a flood if two adjacent properties are
under water. In rural areas, at least two acres must be
submerged.
Communities Get With the
Program
More
than 18,000 communities have cooperated with the federal government to
establish stricter zoning and building measures to control flood damage. In
return, those communities qualify for insurance protection through the NFIP.
The program makes a Flood Insurance Rate Map (FIRM) that shows base flood
elevations, risk zones and floodplain boundaries. The FIRM sets the
insurance rates for buildings in the community. Flood zone information is
available from local government, real estate professionals and insurance
agents.
Your
premium will depend on the level of risk associated with the location
of your home. New flood maps utilize the following categories of Special
Flood Hazard Areas or SFHAs:
• "V" zones are
the most hazardous and most expensive areas to insure. They generally
include the first row of beachfront properties, which are
subject to wave action.
• "A" zones are
usually near a lake, river, stream or other body of water,
and are at risk of peril from rising
waters
• "X" zones are less risky areas where
flood insurance is not mandatory, and is less expensive. (These zones may be
labeled "B" or "C" on older maps)
• "D" zones
have not been studied, but flooding is possible and insurance is
available.
Homeowners in a low- to moderate-risk zone may be
eligible for a discounted
preferred risk policy. And flood insurance should cost the same whether you
buy it from an insurance agent or directly from the
NFIP.
Types of
Coverage
Unlike homeowner's insurance, flood
protection is not designed to return a
home to its pre-disaster state. It is meant to help flood victims avoid
financial ruin. Residential buildings may receive up to \$250,000 in
coverage, while coverage for non-residential buildings is limited to
\$500,000. A separate contents provision may be added, but coverage is
limited to \$100,000 residential/ \$500,000 non-residential. There are
separate deductibles for buildings and contents.
A
"dwelling" policy covers single family and multi-family homes. Apartments
and businesses require a "general property" policy. Condominium owners can
purchase a "residential condominium building association
policy."
Expect a standard 30-day waiting period for new policies,
which means they must be purchased well before any flood warnings
sound.
Next to fire, flooding is the most widespread natural
disaster. Could a
flood ruin you? That's the \$250,000 question to answer when deciding if you
need flood insurance.
© 2003 Emerald Publications
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