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Who
needs flood insurance? Everyone. However, there are many misconceptions
about flood insurance that I think should be discussed. Some clients
tell us they don't need flood insurance or they can't buy flood
insurance because of where they live. This is wrong. National Flood
Myths and Facts (adapted from the FEMA Web site) are:
1. You can't buy flood insurance if you are located in a
high-flood-risk area. You can buy National Flood Insurance no matter
where you live if your community participates in the National Flood
Insurance Program (NFIP), except in Coastal Barrier Resources System (CBRS)
areas
The
program was created in 1968 to provide flood insurance to people who
live in areas with the greatest risk of flooding, called Special Flood
Hazard Areas (SFHAs). In fact, under the National Flood Insurance Act,
lenders must require borrowers whose property is located within an SFHA
to purchase flood insurance as a condition of receiving a federally
regulated mortgage loan. There is an exemption for conventional loans on
properties within CBRS areas.
Lenders should notify borrowers that their property is located in an
SFHA and National Flood Insurance is required.
2. You can't buy flood insurance immediately before or during a
flood. You can purchase flood coverage at any time. There is a
30-day waiting period after you've applied and paid the premium before
the policy is effective.
3. Homeowners' insurance policies cover flooding. Unfortunately,
many homeowners do not find out until it is too late that their
homeowners' policies do not cover flooding. National Flood Insurance
protects your most valuable assets - your home and belongings.
4. Flood insurance is only available for homeowners. Flood insurance
is available to protect condominiums. You can buy a maximum of 0,000
per unit for residential condominiums. The limit for contents coverage
on all residential buildings is 0,000, which is also available to
renters. Condominiums need to carry at least 80% of the replacement cost
or face a coinsurance penalty.
5. You can't buy flood insurance if your property has been flooded.
You are still eligible to purchase flood insurance after your home,
apartment or business has been flooded, provided that your community is
participating in the NFIP. However, there is a proposal by President
Bush to strip federal subsidies from properties prone to repeat flood
damage. In fact, the new budget calls for "eliminating many repetitive
loss properties" from coverage under the program.
6. Only residents of high-flood-risk zones need to insure their
property. Even if you live in an area that is not flood-prone, it's
advisable to have flood insurance. Between 20 percent and 25 percent of
the NFIP's claims come from outside high-flood-risk areas. The NFIP's
Preferred Risk Policy, available for just over 0 per year, is designed
for residential properties located in low-to-moderate-flood risk zones.
7. National Flood Insurance can only be purchased through the NFIP
directly. NFIP flood insurance is sold through private insurance
companies and agents, and is backed by the federal government.
8. The NFIP does not offer any type of basement coverage. Yes, it
does. The NFIP defines a basement as any area of a building with a floor
that is below ground level on all sides. While flood insurance does not
cover basement improvements, such as finished walls, floors or ceilings,
or personal belongings that may be kept in a basement, such as furniture
and other contents, it does cover structural elements, essential
equipment and other basic items normally located in a basement. Many of
these items are covered under building coverage, and some are covered
under contents coverage. The NFIP encourages people to purchase both
building and contents coverage for the broadest protection.
The following items are covered under building coverage, as long as they
are connected to a power source and installed in their functioning
location:
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• Sump pumps.
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• Well water tanks and pumps,
cisterns and the water in them.
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• Oil tanks and the oil in them,
natural gas tanks and the gas in them.
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• Pumps and/or tanks used in
conjunction with solar energy.
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• Furnaces, hot water heaters, air
conditioners, and heat pumps.
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• Electrical junction and circuit
breaker boxes and required utility connections.
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• Foundation elements.
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• Stairways, staircases, elevators
and dumbwaiters.
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• Unpainted drywalls and sheetrock
walls and ceilings, including fiberglass insulation.
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• Cleanup.
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The following items are covered
under contents coverage:
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• Clothes washers.
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• Clothes dryers.
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• Food freezers and the food in
them.
9. Federal disaster assistance will pay for flood damage.
Before a community is
eligible for disaster assistance, it must be declared a federal disaster
area. Federal disaster assistance declarations are issued in less than
50 percent of flooding incidents. The premium for an NFIP policy,
averaging a little more than 0 a year, is less expensive than interest
on federal disaster loans.
Furthermore, if you are uninsured and receive federal disaster
assistance after a flood, you must purchase flood insurance to remain
eligible for future disaster relief.
10. The NFIP encourages coastal development. One of the NFIP's
primary objectives is to guide development away from high-flood-risk
areas. As a condition of community participation in the NFIP, buildings
must adhere to strict floodplain management regulations. In addition,
the Coastal Barrier Resources Act (CBRA) of 1982 relies on the NFIP to
discourage building in fragile coastal areas by prohibiting the sale of
flood insurance in designated CBRA areas. While the NFIP does not
prohibit property owners from building along coastal areas, any federal
financial assistance, including federally backed flood insurance, is
prohibited. However, CBRA does not prohibit privately-financed
development or insurance.
11. The NFIP does not cover flooding resulting from hurricanes or the
overflow of rivers or tidal waters. The NFIP defines covered
flooding as a general and temporary condition during which the surface
of normally dry land is partially or completely inundated. Two
properties in the area or two or more acres must be affected. Flooding
can be caused by:
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• The overflow of inland or tidal
waters; or
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• The unusual and rapid accumulation
or runoff of surface waters from any source, such as heavy rainfall;
or
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• Mudslides, i.e., mudflows, caused
by flooding, that could be described as a river of liquid and flowing
mud; and
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• The collapse or destabilization of
land along the shore of a lake or other body of water, resulting from
erosion or the effect of waves, or water currents exceeding normal,
cyclical levels.
12. Wind-driven rain is considered flooding. No, it isn't. Rain
entering through wind-damaged windows, doors or a hole in a wall or the
roof, resulting in standing water or puddles, is considered windstorm,
rather than flood, damage. National Flood Insurance only covers damage
caused by the general condition of flooding (defined above), typically
caused by storm surge, wave wash, tidal waves, or the overflow of any
body of water over normally dry land areas. Buildings that sustain this
type of damage usually have a watermark, showing how high the water rose
before it subsided. Although the Standard Flood Insurance Policy (SFIP)
specifically excludes wind and hail damage, most homeowners policies
provide such coverage.
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