Hurricane season started June 1 and now is the time to ask yourself if you’re ready. In addition to bottled water and fresh batteries, it may be time to buy flood insurance.
As folks in New Jersey and New York know all too well after Hurricane Sandy, the flooding caused by ocean water pushed ashore by high winds can wash away everything you own.
Standard homeowner’s insurance doesn’t cover flood damage. Yet just 13 percent of American homeowners had a flood insurance policy in 2012, according to a poll by the Insurance Information Institute. Many homeowners figure if they aren’t living on a river or within a few blocks of the beach they don’t need it.
They are underestimating the risk.
Anywhere it rains, it can flood. If you live in a floodplain, you have a one percent or greater chance of flooding in any given year. That means the area has a 26 percent chance of flooding during the life of a 30-year mortgage. Your home is more likely to be damaged by flood than by fire.
If you live in a high-risk area and have a federally backed mortgage such as an FHA loan, your mortgage lender requires you to have flood insurance. But many homeowners in New Jersey beach towns didn’t have flood insurance because they didn’t have a mortgage, leaving them high and dry in the wake of Sandy.
Those living outside the floodplain are also at risk. Atlanta area residents living well outside the 100-year floodplain found catfish in living rooms following floods in September 2009.
People outside of high-risk areas file more than 20 percent of flood insurance claims.
The National Flood Insurance Program provides coverage for up to $250,000 for the structure of the home and $100,000 for personal possessions. The policy provides replacement cost coverage to rebuild your home as it was before the flood.
Personal possessions — furniture, electronics — get actual cash value, which is replacement cost minus depreciation. The older your stuff, the less you will get.
It’s important to note the limits. If you’re home gets $300,000 in flood damage, you’re check is capped at $250,000.
The premium varies according to where your house sits. The average premium was $613 in 2011.
But even a little bit of water can cost you a lot of money. Just six inches of water in your home can do an estimated $39,000 in damages and the deeper the floodwaters, the deeper you must dig into your pocket.
Unless you live in Yuma, Arizona — on a hill — you need to seriously look at spending on flood insurance. Especially if you live in a state vulnerable to hurricanes.
Talk to your insurance agent. There is a 30-day waiting period before the coverage takes effect, so you can’t wait until the levee breaks to buy a policy.