If your home is flooded, don’t look to your homeowner’s insurance policy for coverage. Although your insurance company might be one of the 200 companies nationwide that write and service flood insurance policies for the government, the actual insurance itself is available only through the federal government’s flood insurance program.
Congress created the program in 1968 in response to the rising cost of taxpayer-funded disaster relief. Property owners who buy, build or improve structures in areas prone to flooding are required to purchase flood insurance from the National Flood Insurance Program (NFIP) of the Federal Emergency Management Agency (FEMA).
“Only 44 percent of the homes that should have flood insurance do have flood insurance,” says Butch Kinerney, NFIP spokesman.
Premiums vary depending on the potential for flooding in an area. The average premium paid by homeowners in a high-risk area is $1,500 a year for $100,000 of coverage, according to the Insurance Information Institute.
The amounts homeowners pay for flood insurance are subsidized by the government and “don’t reflect the premiums they are paying in terms of the risks associated with where they’re living,” says Andrew Gray, spokesman for the U.S. Senate Banking Committee.
Only about a quarter of the homes in areas most vulnerable are insured against flood loss, the Federal Insurance Administration reports.
If you live or rent a home or business in a low- or moderate-risk area, you may qualify for the Preferred Risk Policy — a lower-cost flood insurance policy — that provides coverage for your home’s contents for as little as $39 per year and building-plus-contents coverage for $121 a year.
FEMA has created nationwide flood maps to designate possible flood zones and calculate insurance premiums.
If you live in a community in a flood zone, you are eligible for flood insurance.
FEMA reports that Maryland and the District of Columbia have 407 communities participating in the NFIP. There are 272 participating communities in Fairfax, Arlington, Prince William and Loudoun counties in Virginia.
To find out if your neighborhood is included on a federal flood map, check with a local office of the state department of taxation or the building permits office. This information is also available at the FEMA Web site (www.fema.gov).
Ninety percent of national disasters in the country involve flooding, the Insurance Information Institute reports. The industry group says 25 to 30 percent of flood insurance claims during the past five years were in areas classified as lower risks.
FEMA reports that structures in high-risk flood areas have a 26 percent chance of suffering flood damage during a 30-year mortgage. The same homes have a 9 percent chance of loss from fire.
Property owners with land included on a federal flood map must carry replacement coverage. Any lending institution that is regulated by the federal government must require flood insurance in a flood-hazard area in order to finance a property.
“You can have a home in a high-risk flood zone and not have to insure it,” Mr. Kinerney says, “but only if you pay cash for the property, pay off your mortgage, or inherit the property.”