Insurance Space

It doesn’t take a Katrina-style coastal disaster to bring flood damage a homeowner’s way. Snowmelt repelled by frozen ground can cause flooding. New development can leave less soil surface to absorb water, making formerly safe homes suddenly vulnerable.

Yet a typical homeowners insurance policy won’t cover those perils. A homeowner will need separate flood insurance says Consumer Reports, which ranges in cost from several hundred to several thousand dollars a year, depending on coverage and risk levels.

In recent disasters involving both wind and flood damage, some insurers have tried to pin the blame on floodwaters (not covered by their policies) rather than wind (covered) and used that distinction to deny homeowners’ claims.

In an average year, a quarter of all flood losses involve homes in areas deemed low to moderate flood risks by the Federal Emergency Management Agency. In part, that’s because many of FEMA’s flood maps are not up-to-date.

According to an expert at the Consumer Federation of America, while with most insurance, if there is any doubt consumers are advised not to buy it, in the case of flood insurance they recommend the opposite.

Common Questions
Do I have to buy it? If someone is using a federally backed mortgage to buy a home that’s judged to be at high flood risk, the lender may require it. Otherwise, it’s the homeowner’s call.

How do I determine my home’s flood risk? For a preliminary assessment, CR suggests that homeowners go to www.floodsmart.gov, click on Your Flood Risk and enter the home’s address. The level of risk is determined by the property’s location on the community’s flood map. Homeowners can see for themselves at their local municipal offices.

How do I buy it, and how much should I get? Most insurance agents sell national flood insurance. Generally, they recommend replacement-cost coverage for the home and contents; that is, coverage to rebuild the home to its state before the flood and to replace its contents.

Unlike some homeowners insurance, CR notes that a national flood policy generally won’t pay more than the policy limit if rebuilding costs run higher than anticipated.

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Tags: flood insurance