National Flood Insurance
Residents in flood-prone areas can purchase national flood insurance to protect their homes and businesses against water damage caused by a natural disaster. Heavy rain, melting snow, broken levees or dams and hurricanes can create storm surges or swelling rivers and creeks that can quickly devastate home and business owners. Any region carries a risk of flooding, but some are more prone than others. Most homeowners' policies do not include protection against water damage, leaving individuals and families to handle the clean-up and costly repairs of floors, walls, carpets, furnaces and irreplaceable personal belongings. Decades ago, companies wouldn't even provide any coverage for such disasters, considering the risk and payout too great. But in recent years, the federal government has adopted a national flood insurance plan to insure that communities in high-risk areas have the opportunity to purchase a secure policy.
In 1968, Congress passed legislation to launch the National Flood Insurance Program (NFIP) to provide an alternative to disaster relief assistance to individuals and businesses owning or renting property in flood-prone regions and reduce the increasing cost of repairing damage to buildings and personal property. Under the guidance of the Federal Emergency Management Agency (FEMA), the Mitigation Directorate and the Federal Insurance Administration manage over 20,000 communities who have joined the plan and agreed to adopt floodplain management ordinances to reduce future damage. In exchange, the program offers federally-backed policies to people owning or renting property for personal or business use in the community. Policies can be written by any licensed agent. Floodplain ordinances have reduced disaster relief costs by nearly $1 billion annually. Plus, buildings constructed under the NFIP building code suffer much less damage than those that do not. "Therefore whosoever heareth these sayings of mine, and doeth them, I will liken him unto a wise man, which built his house upon a rock: And the rain descended, and the floods came, and the winds blew, and beat upon that house; and it fell not: for it was founded upon a rock." (Matthew 7:24-25)
Community involvement in the National Flood Insurance Program is voluntary, usually initiated through interest or with a notification from FEMA. The federal agency provides a flood hazard boundary map, showing areas prone to flooding and asking the community to implement management regulations to control use of these floodplains. After the application process has been completed, FEMA assesses the risk of flooding and where development is possible. When the sale of national flood insurance is authorized, communities receive an insurance rate map and are given six months to adopt the regulation into its local zoning and building code ordinances. As communities pass stricter legislation, FEMA transfers them from the emergency phase of the program to a regular program. Less than 10 percent of communities in the NFIP remain in the initial emergency phase.
Since its inception, the federal government has continued to improve the program. The Flood Disaster Protection Act of 1973 made the purchase of flood insurance mandatory for properties located in special hazard areas and required banks, savings & loan associates and other similar agents to offer policies to residents at risk. In 1994, Congress passed the National Flood Insurance Reform Act requiring the board of the NFIP and other federal banking regulatory agencies to submit regular reports for four years to determine methods of compliance, regions examined, areas not compliant, actions that were taken to correct misinformation, and recommendations for future action. Congress continued to extend FEMA's authority to issue policies through 2002 and 2003, but problems were still found in the program, especially following the destruction caused by Hurricanes Katrina, Rita and Wilma. These storms caused an estimated $24 billion - more than the total claims paid in the entire history of the NFIP. Opponents of the program have argued that the National Flood Insurance Program has cost taxpayers billions of dollars and have permitted development in floodplain areas, creating risks that otherwise would not have existed. The program is still under review. Legislation passed in 2004 and again in 2006 have modernized the plan. The NFIP Participation Evaluation Act of 2007 launched initiatives to increase the accessibility of coverage to low-income property owners in high-risk areas.
Arguments aside, the National Flood Insurance Program has made much progress in educating the public in management and prevention. By providing flood insurance rate maps, individuals and business owners can determine first-hand whether property is located in a high-risk special hazard area or a low-to-moderate risk area. These maps are usually accessible at a community's planning and zoning department. The NFIP has also taken the initiative to correct erroneous maps previously used by mortgage companies to require purchase of policies and increase premiums unnecessarily. With a better and more accurate understanding of their risk, individuals have the freedom to determine how much coverage they want to purchase instead of relying on information from their mortgage companies, saving thousands of dollars on average. Individuals purchasing property in a hazard area, according to their mortgage company, can request a risk analysis from FEMA to determine accurate risk. If erroneous information is discovered, policyholders are entitled to a refund of the current year's premium as long as they have not filed a claim.
No one is fully ready for a disaster when one comes, but it is wise to takes precautions and prepare as much as possible for when the unthinkable does happen. Flood insurance is just one of many areas in which home and business owners can prepare for disaster. National and local programs have come a long way since the 1960s and will continue to develop in the next several years. Consumers should be aware and take flood risk into consideration when purchasing property. By weighing the level of risk, people can then pursue the level of precaution needed and affordable that is comfortable and within their personal budgets.
Flood Zone InsuranceThe term flood zone insurance can quickly eliminate many a homeowner's interest whose thoughts might be that it doesn't apply to them. Frankly, it is a bit of a snooze for an awful lot of homeowners who live in what are called the low to moderate risk zones. But the US government says all US homeowners live in water danger zones. And if Noah were around he would no doubt agree. The reality is that there are seventy four thousand dams across the US and one third of them pose substantial risk to life and property should they collapse. Floods are the most common disaster occurring each year in America and can come from many sources.
In such odd places as Minnesota or North Dakota, the ground is frozen by November and often remains so until late spring. As heavy snows begin to melt there is often nowhere for the water to go except outward, even miles from rivers and streams. In the Southwest where ground is bone dry for months at a time, a sudden torrential downpour occurs and floods come out of nowhere, referred to as flash flooding, and sun dried adobes become water drenched lumps. And while the obvious hurricane coastlines have their need for flood zone insurance, hurricanes have roared across the Caribbean and swept onshore, churning up towards Tennessee and then stalling and stalling. Sometimes for days the torrential rains come, hundreds of miles from those who had battened down the hatches.
The destructive force of floods has been clearly shown by the US government in its scenario of a nine hundred square foot ranch style house in Anywhere, USA. A six inch flood occurring in this house would bring an average of eleven thousand dollars damage to the residence and contents. A nine inch deluge would cause over eighteen thousand dollars in damage, while an eighteen inch water torrent brings with it over twenty-six thousand dollars in damages to the home owner, on average. The television pictures of homeowner sitting on the tops of roofs, obviously never expecting to need flood zone insurance and looking for help, can only bring thoughts to viewers of unimaginable pain and suffering for those living where the waters were not expected to ever come. But forget the Mississippi over reaching its banks, what about that storm drain out in front of your house backing up?
It would have to be very painful for those homeowners who had chosen not to purchase flood zone insurance in low to moderate risk zones to learn that the coverage could have cost fewer than one hundred and twenty dollars a year. Contents and building coverage for a total of two hundred thousand dollar would cost about three hundred and twenty five dollars a year. Living in the second of the three water deluge zones may put someone by a beautiful river or a gorgeous lake but it will cost someone for the same two hundred thousand dollar house about two hundred dollars a month for flood zone insurance. Floods were certainly common in biblical days and Jesus once compared a Christian's life to a life based not on Jesus Christ but on some other belief, goal or philosophy. "And the rain descended and the floods came and the winds blew and beat upon that house; and it fell not: for it was founded upon a rock." (Matthew 7:25)
But you say, I want Florida or Southern California or on that big lake with the dam just down the road. All rightee then. Do you live near a bank, cause there will be a need. The US government estimates that flood zone insurance for coastal and extremely high risk flood zones will cost almost six thousand dollars for that two hundred thousand dollar house and its contents. Yikes! There may be ways around this cost by opting for higher deductibles, but for those living in these zones it's all part of the attraction, apparently.
If moving to any new area of the country, and budget issues are important, wisdom would dictate a person checking with insurance and real estate agents before arrival to see what the requirements will be for holding mortgages. Lending institutions will probably demand on having flood zone insurance if the home is under any kind of flood threat. Knowing what that insurance demand will mean to an overall mortgage payment may help determine immediate future plans for some transients. There are services online that dispute FEMA flood zone boundaries. Some websites claim that 90% of FEMA's claims of existing floodplains are wrong and that they can help the consumer claim back their low risk insurance status. There have been questions regarding whether or not pseudo high risk zones may be paying for repeat homeowner claims in actual high risk flood zone insurance areas.
About eighty to one hundred providers of flood coverage offer services to US homeowners as well of owners of commercial buildings. There are typically about thirty days after the purchase before the policy goes into effect, so a policy purchase could not help two days before an expected flooding takes place. The average flood insurance premium may be about three hundred and seventy dollars a year. A low interest fifty thousand dollar emergency loan will cost three hundred and ten dollars a month for years to come. For those in high risk zones, paying flood insurance is a way of life. For those far away from river and lake, it's a roll of the dice.