The Changing Rules Of Flood Insurance

The Changing Rules of Flood Insurance

New maps may put your home in the zone for flood insurance.

By Anne Kates Smith, Senior Associate Editor
From Kiplinger’s Personal Finance magazine

Flood insurance doesn’t grab the headlines like, say, health-care reform does. Yet it’s got all the elements of a front-burner issue. Inland homeowners caught by surprise by the recent deluges in Tennessee and New England are angry that they weren’t sold flood insurance, while communities across the country are up in arms as new flood maps sweep them into insurance-required zones.

Meanwhile, questions swirl about the future solvency of the federal government-run insurance program, which covers 5.5 million properties. Intended to be supported by policy premiums, it now owes Uncle Sam almost $19 billion. And although Washington politicians debate badly needed long-term reforms, the program limps along on successive rounds of short-term funding. In the past year, the National Flood Insurance Program has lapsed (meaning no policies could be sold) three times. The most recent interruption came in June, just as hurricane season opened with forecasters calling for three to seven major storms this year.

Don’t be put off by all the noise. This is a great time to consider flood insurance. Flooding isn’t covered by most homeowners policies, and insurance may be more affordable than you think — especially given the high cost of fixing flood damage. You must carry flood insurance if you have a federally backed mortgage and your home is in a high-risk zone — defined as having a 26% chance of flooding within a 30-year period, or 1% annually. Flood insurance is optional if you don’t have a mortgage or you live in a less risky area, but it’s an option you should consider because 25% of all flood claims are made in areas of low to moderate risk.

Even though the flood-insurance program is run by the feds, you purchase a policy through an insurance agent at one of some 90 companies nationwide. Your community must participate in the NFIP (more than 20,000 do). You don’t have to comparison-shop because the rates are set by Uncle Sam (see estimated premiums and find an agent at

“Give us a call at the Bogle Agency Insurance and we can tailor the exact kind of coverage you are looking for,” said Philip R. Bogle, owner.  “With all of the recent storms and heavy amounts of rain, the time has never been better for you to update your insurance and guarantee your property is protected.”

A home that’s in a low-risk zone may qualify for a preferred rate, with annual premiums ranging from $119 to $395 to protect both the home and its contents, depending on how much coverage you buy. Standard rates in a high-risk area start at $477 and go up to $2,633 a year. Coverage for basements is limited. You can insure your home for up to $250,000 and its contents for up to $100,000; renters can buy contents-only coverage. If you want insurance beyond what the NFIP provides, you must buy “excess” coverage from a private insure that can be secured through your insurance agent.

Don’t be upset if an updated flood map draws you into a higher-risk zone. A bigger worry is that an outdated map might conceal your true risk. (You can see whether your map is scheduled for review or has recently been updated at Buy a policy before the new map becomes effective, which can take a few weeks to several months, and you’ll lock in the lower rates associated with the lower-risk zone. Don’t wait until you hear raindrops on the roof: Policies take 30 days to go into effect.