Who Needs Flood Insurance?When your home is flooded, it can lead to financial ruin if you don't have the proper insurance. And note this: A basic homeowners policy won't cover your flood damage! You need flood insurance - a special policy backed by the federal government, with cooperation from local communities and private insurance companies.
About 200 insurance companies, possibly including the company that already handles your homeowners or auto insurance, write and service flood insurance policies for the government, which finances the program through premiums. Although flood insurance is relatively inexpensive, most Americans neglect to purchase protection. Only about one-quarter of the homes in areas most vulnerable are insured against flood loss, according to the Federal Insurance Administration (FIA). In those areas, flooding is 26 times more likely to occur than a fire during the course of a typical 30-year mortgage. More than 19,000 communities have agreed to stricter zoning and building measures to control floods, according to the Federal Emergency Management Agency (FEMA). Residents in these communities are entitled to purchase flood insurance through the National Flood Insurance Program (NFIP), a program FEMA oversees. Purchasing your policy
The average flood insurance premium in 2000 was $353 a year. The average amount of flood insurance purchased in 2000 was $124,089. Policies are available in three forms: "Dwelling" (most homes); "General Property" (apartments and businesses); and "Residential Condominium Building Association Policy" (condominiums). All have limits on coverage. You might be eligible for discounts if you live in a low- to moderate-risk zone.
A Flood Of Data
Wondering what type of policy you should buy and how much coverage you need? Do you simply need a good definition of a flood? The Federal Emergency Management Agency, which oversees the National Flood Insurance Program, answers these questions and more on its Web site.
In general, the policy does not take effect until 30 days after you purchase flood insurance. So, if the weather forecast announces a flood alert for your area and you run to purchase coverage, it's already too late. You will not be insured if you buy a policy a few days before a flood. Insurers and FEMA officials say the national flood program works best for everyone when more people participate. This lowers rates, increases the pool of funds from which to draw in the event of a flood, and lessens the chance that claim payments will have to taken from taxpayer funds. Picking A Company
Since the federal government sets the rates, private insurance companies that sell flood insurance compete on service, not on price. These "Write Your Own" companies make their profit from service fees allotted by the NFIP. When comparing insurers, one question to ask is how quickly are claims resolved? A company in poor financial health may not be able to pay its claims as promptly as a prosperous company. You can check the financial strength of companies at www.ambest.com
Living on the shoreline? It'll cost you
If your home sits between the mainland and often-stormy, ocean waters, you might not be eligible for federally subsidized insurance. The government limits its liability by excluding property owners in such areas as the North Carolina Outer Banks, sections of the Florida panhandle, and selected areas in Delaware and South Carolina. The reason stems from the Coastal Barrier Resources Act, which is designed to protect wildlife living in valuable ecological areas. The government discourages development by withholding subsidized insurance.
Also, a study released by the FEMA on June 27, 2000, reported that close to 87,000 homes and buildings have been built on land likely to wash away during the next 60 years. Some insurance companies are willing to expose themselves to higher risks and take on policies in some of the developed barrier areas. Instead of $340 in premiums offered through the government program, a few private companies will charge about $3,000 a year for flood coverage of slightly less than $200,000 Flood insurance: Are you in the zone?
The Federal Emergency Management Agency (FEMA) has placed more than 19,000 communities in the United States into a category of flood zones. Each community is able to participate in the agency's National Flood Insurance Program (NFIP), with premium rates determined by the risks of flooding. To indicate the risks in different parts of the country, FEMA has assigned a character from the alphabet to each zone.
The major zone categories are V and A, which have the highest risk of flooding. Older maps list B and C as minimal-risk zones, but those characters have been phased out and relabeled as X zones on new flood maps. There are several ways to find out which zone applies to you. You can go to your town hall or city hall, where employees responsible for issuing building permits in your area have access to flood zone maps. If you are buying a home, your Realtor and your insurance agent should be able to help you. Also, you can order a flood map from the FEMA's Map Service Center for a nominal charge by calling (800) 358-9616 or by visiting the FEMA Web site. V zones
These are the most hazardous of the Special Flood Hazard Areas, or SFHAs. V zones generally include the first row of beachfront properties. The hazards in these areas are increased because of wave velocity - hence the V designation. These property owners pay more than $1,000 annually and flood insurance is mandatory.
A zones
A zones - the next most volatile of the SFHAs - are subject to rising waters and are usually near a lake, river, stream or other body of water. Flood insurance is mandatory in all A zones, where premiums can be about $895 annually because of the high potential of flooding.
A-zone maps also include AE, AH, AO, AR, and A99 designations, all having the same rates. The different A zones are named depending on the way in which they might be flooded. X zones
These are minimal-risk areas where flood insurance is not mandatory. Homeowners in X zones (which are labeled B and C zones on older maps) pay as little as $395 annually. In certain cases, property owners may qualify for the $100-a-year preferred risk policy.
D zones
These are areas that have not been studied, but where flooding is possible. Flood insurance is available in participating communities.
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