|hings a bit damp in the
basement? Like you have a couple of feet of water, and the rec room is looking like the Titanic
grand ballroom, only a lot less grand?
Well, don't call usand we won't call you either. That's the attitude of most property insurers. Let's get to the point: Standard homeowners insurance does not cover flood damage.
Muck, slime, drywall crumbling, furniture floating out into the Gulf of Mexicoyou're just not covered. And unless your county is "lucky" enough to be declared a federal disaster by the president, don't expect any help getting back on your feet.
Even then, federal disaster aid offers only low-interest loansnone of those lovely insurance checks for you, buster.
Don't believe us? The Insurance Information Institute's Web site answers "Are you covered for flood?" with one word. And you won't need a lawyer to decipher this insurance-industry gobbledygook.
The word is "No." The long form of the answer might read, "Floods are a bit too risky for us!"
So if floodwaters are rising, we suggest you trundle down to your insurance agent and ask about federally sponsored insurance available through the National Flood Insurance Program (NFIP), a branch of the Federal Emergency Management Agency. Actually, buy before the water starts rising: With few exceptions, coverage takes effect 30 days after you pay the first premium.
NFIP coverage is available to businesses, homeowners, and tenants living in almost 19,000 municipalities that participate in the federal flood insurance program. Although those localities have taken steps to minimize vulnerability to flood damage, some people claim that the insurance promotes unwise development in flood-prone areas by reducing the risk. In almost every session of Congress, lawmakers introduce bills to trim or scuttle the flood-insurance program.
in areas with
"low to moderate"
|On the dry side
While the politicians wrangle, we'll explain the benefits and limitations of NFIP policies, which are available through private insurers. The policies cover:
The odds that any property will need flood insurance depend on elevation and proximity to water. Broadly, during any 30-year period, NFIP says the average building has a 26% chance of getting flooded. In contrastonly about 4% of buildings are likely to burn during an average 30-year period.
With those odds, you now should understand why insurers sell fire insurance and leave the flood coverage to Uncle Sam. Those odds also explain the popularity of NFIP, which has about four million policyholders. NFIP says insurance can be useful even if you don't live within sight of a river or beach. About one-quarter of claims cover structures in areas with "low to moderate" risk of flooding.
For low-risk areas, a $100,000 policy will cost slightly more than $100 a year. If you live in a Special Flood Hazard Area (ask your building or zoning department), you'll be paying closer to $300.
For an idea of the value of flood insurance, the NFIP calculates that you'd fork out $300 a month to repay a $50,000 federal-disaster loanevery month for 20 years.
|It's our policy
Not every house needs flood insurance. Standard homeowners insurance may cover damage from broken pipes, for example. If you're plagued by the occasional damp cellar, prevention might be a better bet. Direct rainwater away from your basement or hire a basement waterproofer instead of paying an insurance premium.
On the other hand, in some circumstances you must buy flood insurance. If you're getting federally backed financing to buy property in a Special Flood Hazard Area, you likely will be compelled to get coverage. This requirement pertains to most types of mortgage loans, including credit union mortgages, not just those obtained from the Federal Housing Authority and Veterans Administration.
One final note: If you have federal flood insurance, Uncle Sam will fork over $750 for sandbags, plastic sheeting, and other levee material if the worst happens. Don't try buying sand with a standard homeowners policy!
David Tenenbaum is the author of " The Complete Idiot's Guide to Troublefree Home Repair," second edition, Macmillan General Reference (ISBN 0028632621).
|© 2000 Credit Union National Association Inc.|