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Do You Need Flood Insurance?
By JLP | May 8, 2006
This weekend’s Wall Street Journal had a story about flood insurance ($). Since the article isn’t available for free, I want to highlight some of the main points.
Flooding ranks as the most common natural disaster in the U.S. Floods occur in ALL fifty states.
Forty percent of homes in high-risk areas are NOT covered by flood insurance. That’s a lot! In the Midwest and Northeast less than a third of the homes in high-risk areas are covered.
Definition of high-risk flood zone: An area with a more than a one-in-four chance of flood damage over a standard 30-year mortgage.
There are 11 million people who live in high-risk flood plains and only 25% of them have flood insurance (according to the Insrance Information Institute).
Nearly all home-insurance policies exclude flood damage.
Basic coverage for homeowners, renters, and small businesses is provided by the National Flood Insurance Program (NFIP), which are subsidized by taxpayer money.
Policies through the NFIP cover a maximum of $250,000 for a home’s structure and $100,000 for its contents. These policies DO NOT cover most of the contents of a basement if the house is in a high-risk zone. They also do not pay living expenses if you can’t stay in your home due to damage.
NFIP policies also do not provide replacement-cost coverage. Instead, they pay a depreciated value for damaged property or belongings.
Once purchased, coverage doesn’t take effect for 30 days. Once a hurricane is forecast for your area, it is too late to buy insurance.
To assess your need for coverage, go to FloodSmart.gov and enter your address. The next screen will tell you what your risks are. Keep in mind that some of these stats are drawn from maps that are 20 years old, so the information may not be accurate. I entered several different addresses and NEVER got better than moderate. My guess is that they are going to claim EVERYONE is at least at moderate risk for flooding.
Topics: Miscellaneous | 1 Comment »
May 8th, 2006 at 10:43 am
All WSJ articles are free for everyone in an “open house” through May 10.