FLOOD INSURANCE

The Federal Emergency Management Association (FEMA) reports that homeowners in designated flood plains are 27 times more likely to experience a flood than have a fire during their 30-year mortgage. Almost a third of its flood claims come from homeowners outside of high-risk areas. Many homeowners don't buy flood insurance because the believe they are covered under their homeowners policies. That's because they never bother to read the policy and probably bought it from a golfing buddy who never read one what they bought.

The basic homeowners policy will cover you if a pipe bursts or a hurricane takes off your roof and rain blows into your home. Extra coverage can cover for sewer backups. But they don't cover for "rising water". The government, through the National Flood Insurance Program (NFIP), which was created in 1968 to protect property in Special Flood Hazard Areas (SFHAs), is the only entity selling flood insurance. Such policies cover

1. Overflow of inland or tidal waters.

2. Unusual or rapid accumulation or run-off of surface waters from any source.

3. Mudslides, caused by flooding, comparable to a river of liquid and flowing mud.

4. Collapse or destabilization of land along the shore of a lake or other body of water, resulting from erosion, waves or currents exceeding normal, cyclical levels.

You can only buy the insurance if your community is a member of the National Flood Insurance Program (about 18,600 member communities out of a total of 22,000 communities in the US.)

Even if you don't buy insurance, you might be covered under federal assistance though major disaster zones- but only once. If a flood happens again and you're not covered, too bad. Even if an emergency is called, the average grant is only $2,500

If you live in a flood hazard area, you are apt to be forced to get flood insurance when you apply for a mortgage. It's a requirement for federally insured mortgages and is now being required by some private lenders.

It isn't necessarily that expensive. For around $100 annually, a homeowner can get $20,000 of home coverage and $5,000 for contents. In high flood areas however, the cost is higher at about $300 a year and homeowners can get structure coverage of $250,000 and contents of $100,000.

FEMA rules require a 30-day waiting period after you've applied and paid the premium before the policy becomes effective. The only way to eliminate the waiting period is to buy the insurance "in connection with making, increasing, extending or renewing of a loan," according to FEMA.

Flood insurance: (2004) The National Flood Insurance Program (NFIP) is offering new Preferred Risk Policy (PRP) products for both the commercial market and renters markets. Created in response to consumer demand for lower-cost flood insurance options, these new products will help the insurance industry reach new customers, offer more options to existing customers, and protect agents against errors and omissions exposure.

The Preferred Risk Policy is an easy-to-write, low-cost flood insurance policy for properties in low-to-moderate risk zones, where one in four NFIP flood insurance claims occur. Devastating storms such as Tropical Storm Allison and Hurricane Floyd caused widespread flooding and property damage in these areas.

Flood insurance: (2004) between eight million and 11 million homeowners live in flood zones, only 4.4 million carry federal flood insurance. And 25% of flood claims are paid to victims living outside an established flood zone and in zones labeled low-to-moderate risk for flooding. The upshot is that homeowners are generally ill-prepared for the most common disaster they will likely ever face. Worse, many wrongly assume their standard homeowner's policy will cover a flood.

an estimated $3 billion in property is lost each year to flooding, of which the flood program has paid out $773 million annually in claims

Wind and flood: (2005) Many consumers are not aware that there is a 30-day waiting period before a flood insurance policy will take effect. To make matters worse, many companies require high deductibles for windstorm claims, forcing an unsuspecting consumer to pay thousands of dollars over the standard homeowner deductible.

FLOOD CLAIMS - (2006) Claims against the federal flood insurance program for damage related to hurricanes Katrina and Rita could exceed $22 billion, requiring an additional $5 billion in borrowing authority for now. Run by FEMA, the flood insurance program can borrow from the U.S. Treasury to cover claims not covered by the premiums it collects to cover homeowners and small businesses. Congress had already increased the program's borrowing authority in September from $1.5 billion to $3.5 billion to pay Katrina-related claims. Critics of the program contend that it is exposed to properties that are repeatedly flooded and that taxpayers are put at risk when substantial borrowing is required to pay claims. "A sizable portion of properties continue to receive insurance rates that are far from actuarially sound,"

WATER DAMAGE EXCLUSION UPHELD- (2006) A U.S. District Judge for the Southern District of Mississippi recently upheld the water damage exclusion in a homeowners policy. A Mississippi couple whose home was damaged by flooding from Hurricane Katrina sued Allstate for denying their claim for water damage. The Court concluded that, "The exclusions found in the policy for damage attributable to flooding are valid and enforceable policy provisions."

Only a government policy covers flood insurance.