Column.Flood Insurance: Is it for You?
Recent flooding in Texas and the prediction of a very active 2013 hurricane season may have you wondering if you should have flood insurance - or if it is even available for your property. Here are some facts that may help answer your questions.
Flood insurance comes under the National Flood Insurance Program (NFIP), which is administered by the Federal Emergency Management Agency, or FEMA. Since most homeowner's insurance policies don't cover flooding, Congress created the NFIP in 1968 to help property owners protect themselves from the financial toll of a flood. NFIP doesn't actually write the policies, but can refer you to an insurance agent or company who can. According to an interactive tool on NFIP's Web site just 2 inches of water could cost you $7,800 in cleanup. And over the past 10 years, the average flood claim has amounted to over $33,000.
“If you believe that if you are in a serious flood that federal disaster assistance will pay for your damage, you may be disappointed”, said Mechele Agbayani Mills, President and CEO of BBB Serving Central East Texas. “Federal disaster assistance comes in the form of a low-interest loan, not a grant, and only if the President formally declares a disaster.”
Not a homeowner but worried about flooding? Renters, condo unit owners and business owners can also buy flood insurance as long as their community participates in the NFIP. Coverage is as follows (though obviously you can't insure property for more than it's worth):
- Single-family residential buildings (owners): $250,000 maximum;
- Residential condo units (owners): $250,000 maximum;
- Contents coverage on all residential buildings (available to owners and renters);: $100,000 maximum
- Businesses (owners): $500,000 maximum for the building and $500,000 maximum for the contents.
So, can you buy flood insurance if you live in a high-risk area? Yes, in fact if you are in a high-risk area and have a federally-backed mortgage you will be required by your lender to have flood insurance when you obtain the mortgage. If you're in a moderate-to-low risk area you may wonder if you should bother. NFIP says that almost 25 percent of all flood insurance claims come from areas with low-to-moderate flood risk. Those in low-to-moderate flood risk areas may qualify for the Preferred Risk Premium, which can be as little as $119 per year.
You can buy flood insurance for a property that has been flooded before. You can buy a policy any time (even during a flood!) though there is usually a 30-day waiting period for it to go into effect. An insurance agent who offers NFIP insurance can help answer your specific questions.
To learn more about flood insurance visit NFIP's site or FEMA's NFIP page. If you live on a military installation and are wondering about flood coverage there, contact your installation housing office to see if you are covered by any flood policy while in quarters. As with any insurance purchase, when you consider buying flood insurance you will need to decide how much, if any, coverage you are willing to pay for, and how much risk you are willing to assume if you don’t opt for insurance.
For more tips on how to be a savvy consumer, go to www.bbb.org. To report a fraud or scam, call the BBB Hotline: (903) 581-8373.