Don’t Get Swamped - Get Flood Insurance!

The most common natural disaster in the United States is flooding. Unfortunately, most consumers and businesses do not have flood coverage because almost all standard insurance policies exclude flooding. In order to secure coverage for flooding, a separate policy must be purchased from the federal government that provides coverage specifically for the peril of flood. Although this coverage can be expensive, for most home and business owners it is a good buy for the money as it provides comprehensive coverage for all types of flooding and helps buyers to rebuild their homes and businesses after a flood.

The National Flood Insurance Program (NFIP) was created by Congress to provide coverage for flooding because most insurance companies would not provide this coverage due to the catastrophic nature of floods. The program has enabled consumers to buy flood coverage for more than 50 years and has been paying thousands of flood losses each year. In just the last 10 years, the NFIP has paid more than $25 billion in losses to policy holders. In 2005 alone, the year of Hurricane Katrina, the program paid almost $18 billion in claims. Keep in mind that these are paid claims to individuals and businesses that bought coverage from the NFIP. Many more consumers and businesses did not get their flood losses paid because they had no flood insurance. For them, the options are to bear the loss themselves or to apply for government assistance in the form of disaster loans. Although these loans help to rebuild homes and businesses, they also must be paid back with interest. Flood insurance pays losses without any need to repay the NFIP.

How do you get flood insurance?
Most communities are eligible for flood insurance. The community applies to the NFIP for approval. The NFIP will inspect the community, identifying the flood risk throughout the community. The risk of flooding is then marked on a flood insurance rate map. When a consumer wants to buy flood insurance, they fill out an application. The NFIP then checks the location of the property against the rate maps. The higher the chance of flooding, the more the flood insurance will cost. Those properties built near rivers, creeks, or lakes will have higher rates than those built on higher ground away from bodies of water. Some areas are considered to be preferred areas because the chance of flooding in these areas is relatively low. Flood insurance for these areas is very inexpensive-as low as $119 a year. Flood premiums in high risk areas can run into thousands of dollars a year, but the average flood insurance premium is about $600 a year. So for most people flood insurance can be very affordable.

Although most of us consider flooding to be a risk we don’t see much of in California or Arizona, floods can occur almost anywhere in the United States. One of the high risk areas in California is the Sacramento and Stockton areas where hundreds of miles of levees protect thousands of acres of farmland as well as major metropolitan areas. In Arizona, summertime monsoon rains often cause flooding in areas that normally are bone dry. Flood insurance even comes into play in situations when sewers or street drains get plugged up and water backups into local homes. So, flood insurance can provide coverage even for consumers that live in preferred flood areas. In fact, 25 percent of the flood claims paid by the NFIP are for claims that occur in low flood risk areas.

Even though flooding is not considered a major peril in California, consumers bought $68 billion in coverage last year. In Arizona, residents bought $7.5 billion in flood coverage over the last year. Considering the fact that most people do not buy flood coverage even in high risk flood areas, these numbers would be much higher if all the consumers located in high risk areas bought flood insurance.

Earlier this year, thousands of property owners suffered flood losses when many rivers in the Midwest and South experienced serious flooding. These property owners needed flood insurance from the NFIP in order to get paid for their flood losses. Similar losses are possible in many areas in California and Arizona. Consumers should determine the flood exposure to their properties and secure flood insurance if appropriate.

Western Growers Insurance Services can secure flood insurance for both personal and business properties. If you’d like to get more information about flood insurance for your property please contact us.