Why You Should Consider Buying Flood Insurance

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Record flooding in Missouri—and the threat of more torrential rains, flash floods, and windstorms throughout the Ozarks and mid-Mississippi Valley—are a reminder that it can be a good idea to have flood insurance, and to buy it early enough to make a difference. While the flooding in the news today centers around the Gasconade, Meramec, and other rivers, floods can take place at any time and in unexpected places, according to the National Flood Insurance Program, which provides flood insurance administered by the Federal Emergency Management Agency (FEMA).

"People think, 'I’m not by a river or stream, so I don't need it,'" says Keith Brown, chairman of Kalispell, Mont.-based Aon National Flood Services, a provider of flood insurance policies. "But flooding can be caused by other things such as high snowpack, overdevelopment, or a storm drain backing up in a cul-de-sac."

Flooding, especially in basements, is more likely to happen in newly developed areas, where new roads reduce water absorption into the soil. Even if such an area is typically dry, an unexpected downpour could damage basements and parked cars.

More than 20 percent of flood claims originate in locations deemed "moderate" or "low" risk, according to the National Flood Insurance Program. A third of disaster-assistance requests from flooding come from such areas, says Brown.

Flood insurance is the only coverage that will indemnify you for damage due to groundwater seepage and mudslides. If a neighbor's above-ground swimming pool collapses and the water flows into your home, flood insurance will cover the cost of the damage. Similarly, if a water main breaks and damages your home and at least one other home in your neighborhood, flood insurance comes to the rescue. Traditional homeowners insurance and auto insurance don't cover such calamities.

How to Buy Flood Insurance

In many parts of the country, this is the time to buy flood insurance. Once you purchase it, there is a 30-day waiting period before the policy is activated. Such a policy could be helpful to you once hurricane season starts on June 1.

You can purchase federal flood insurance from the National Flood Insurance Program. The insurance policies are backed by the federal government, which sells it directly, and through dozens of private insurance companies throughout the country. Check with an agent who sells homeowners coverage for details.

Federal flood insurance coverage is capped at $250,000 per dwelling and $100,000 for contents, though you can purchase policies with lower limits. There are eligibility requirements, however, and numerous exclusions. For example, the boiler, water heater, and other essential systems in your basement are covered, but nonessentials, such as a TV, an audio system, and furniture kept in the basement are not covered. Higher coverage limits are available for non-residential structure and contents policies.

People who live in low- and moderate-risk areas and buy federal flood insurance pay standard premiums set by FEMA. Those rates are the same regardless of where you buy your coverage.

To get an assessment of the risk that you will be a victim of a flood as well as an estimate of your annual premium and a link to area agents who sell federal flood insurance, visit the FEMA Flood Map Service Center, plug in your property address, and click on "Interactive Map." This will take you to the official flood insurance rate map for you area. To request an agent referral, contact the National Flood Insurance Program Referral Call Center at (888) 379-9531. The average premium to insure a home that's a moderate-to-low risk property is $420 annually, FEMA says.

You also can use FloodTools.com, a commercial site, to see your property on a flood map and get detailed estimates of premiums.

If you're in a high-risk area, your premium is likely to be tailored to your property. Stephanie Moffett, a FEMA spokesperson, says there are many variables that go into the pricing, including the age and construction of the home, its proximity to water, the elevation of the house as well as the home's value.

Private Flood Insurance

Increasingly, private insurers are offering flood coverage. The policies either supplement federal flood insurance by providing higher coverage limits, or replace it as the homeowner's primary flood policy. A few insurance carriers provide it as an optional rider on their homeowners coverage.

Depending on your situation, you may find private flood insurance has lower premiums than the federal version. Or, it may require fewer add-on costs. For example, in about 20 percent of cases, the government will require that a professional come to the home to draft an "elevation certificate" to determine the insurance rate. The homeowner pays that bill.

In addition, private coverage may cover your living expenses if you have to relocate while your home is being cleaned up after a flood. That's something federal flood insurance won't provide.

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