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When the Water RisesRecent disasters have proven that flood insurance is more important now than ever before.
Disasters usually have a way of reminding us of important lessons. In late-summer 2005, that disaster was Hurricane Katrina, and the lesson was to always be prepared.Out of the rubble of the Gulf Coast region emerged a lack of preparedness on a variety of levels. On a basic level, most citizens lacked flood insurance, even though New Orleans is a city surrounded by water. In fact, it was estimated that between only 30-40% of residents hit by Katrina had any form of flood insurance. In some places, this number was even lower.Many policyholders do not realize that basic homeowners insurance does notinclude protection from flood damage. Instead, the Federal EmergencyManagement Agency (FEMA) administers flood insurance through a federalprogram. In many cases, if your home is in a high-risk area for flooding, you must getflood insurance in order to get a mortgage. In the wake of Katrina and later,Hurricane Rita, many called for flood insurance to become mandatory in highand even medium-risk areas. Just as auto insurance is required by thegovernment, flood insurance could be too. Increased participation would alsomean much lower rates, the more people who sign up, the cheaper theinsurance is.Flood insurance is actually quite affordable. But that has yet to increase itspopularity. According to insure.com, only one-quarter of the most vulnerablehomes are insured, even though statistics have shown that their homes aremuch more likely to be flooded than be destroyed by fire.And in the case of Katrina, flooding wasn’t the only damage to homes andbusinesses. Looting and fires ended up destroying many possessions.Prices depend entirely on the amount of coverage you wish to purchase andthe area your home is located in. The “average” cost of flood insurance isabout $438 for a year. Costs for the insurance can range from around $2,000a year in a flood-prone area for $250,000 in building coverage with $100,000coverage for the contents. If you simply live near a flood zone, instead of in it,the prices for $35,000 in building coverage and $10,000 for the contents willcost about $300 a year. This is for people who live in a low to medium riskarea. Recently, flood insurance providers in South Carolina and California, twoflood-prone areas, have received a large increase in calls asking about floodinsurance policies. This may be a sign that the disaster in the Gulf has helped to remind people of the need for preparation.Flood insurance may not be right for you, and you may not live in a high-risk area. But at any given moment, many formerly safe areas can be flood-prone and the results can be devastating. Hurricanes Katrina and Rita have taught us all to be more prepared in the event of a disaster and one of the best ways to make sure your home and possessions are safe, is to buy flood insurance.