Flood Insurance Makes Recovery Faster and Easier 

Release Date: October 26, 1999
Release Number: 1293-55

» More Information on Virginia Hurricane Floyd

HAMPTON, Va. -- Nearly 66,000 Virginians in 258 communities have flood insurance on their property, according to statistics available from the National Flood Insurance Program (NFIP) in Washington, D.C. In the aftermath of the flooding caused by Hurricanes Dennis, Floyd and Irene, many are thankful that they do.

Others, though, may wish that they did have flood insurance. They are discovering that the typical homeowner's policy does not cover flood damage.

Federal Insurance Administrator Jo Ann Howard, who manages the NFIP, estimates that only one in four homeowners who live in a floodplain have flood insurance.

"I strongly urge those who don't have a flood insurance policy to buy one before the next flood," Howard said. "You can recover so much faster and more completely when you have flood insurance."

According to Tom Davies, federal coordinating officer for Hurricane Floyd recovery activities in Virginia, "Flooding is the leading cause of property loss from natural disasters in this country. It's unfortunate to see flood victims shouldering losses that could have been covered by insurance."

Flood insurance through the National Flood Insurance Program is available to residents and business in communities that have agreed to adopt and enforce floodplain management practices to reduce future flood damage.

For a single family home, coverage is available up to a maximum of $250,000 on the structure and up to $100,000 on contents. For small business owners, the maximum is $500,000 on the building and another $500,000 on the contents. Renters may purchase up to $100,000 for personal belongings.

An average flood insurance policy for a home in a flood hazard area costs about $595 a year for $100,000 in coverage. Policies cost much less outside the special flood hazard areas--sometimes as little as about $200 a year.

NFIP coverage is sold through private insurance companies and agents and is backed by the federal government. Check with any insurance agent who is licensed to sell property and casualty insurance. For more information, contact a local agent or company or call the National Flood Insurance Program toll-free numbers, 1-800-720-1090 or 1-800-427-4661.

Things to Keep in Mind about Flood Insurance

During the life of a 30-year mortgage, there is a one percent chance that a house will be damaged by fire; there is a 26 percent chance that a house will be flooded if it is located in a Special Flood Hazard Area.

Federal disaster assistance for flood victims is available only if the president declares a disaster. In those cases, the average disaster recovery grant is about $2,500. Other assistance often comes in the forms of loans that must be repaid.

More than 90 percent of all disasters in the United States are not presidentially declared. Flood insurance, which can cover the structure and the structure's contents, pays whether the disaster is presidentially declared or not.

Flood damage does not occur only in high-risk flood zones. About 35 percent of all flood insurance claims come from low-to-moderate-risk areas. The flooding following Hurricane Floyd has largely been outside of high-risk flood areas.

A floodplain is any land area susceptible to being inundated by floodwaters from any source.

A Special Flood Hazard Area (SFHA) is an area with a one percent chance of being flooded in any given year. Hence, the area is in the 100-year floodplain.

A flood is defined as a general and temporary condition or partial or complete inundation of normally dry land areas from one of the following four sources:

The overflow of inland or tidal waters.

The unusual and rapid accumulation or runoff of surface waters from any source.

Mudslides which are proximately caused by floods, as defined above, and that are akin to a river of liquid and flowing mud on the surface of normally dry land areas.

The collapse or subsidence of land along the shore or a lake or other body of water as a result of erosion or undermining caused by waves or currents of water exceeding the cyclical levels that resulted in flood.

Flood insurance may be purchased at any time, but usually there is a 30-day waiting period before a policy becomes effective. Don't wait for a storm to approach to purchase flood insurance. Property located in a Special Flood Hazard Area must carry flood insurance to be eligible for conventional home mortgage loans, FHA or VA loans, second mortgages, home equity loans, construction loans, commercial loans and farm credit loans.

Although the law requires only that the amount of flood insurance equal the outstanding principal balance of a loan, owners should consider protecting the property's equity as well, by insuring for a higher value.

Owners of manufactured homes often are required to purchase private flood insurance that only protects their lender's interest in the property. These policies usually pay off only the remaining principal on the loan after a flood. But owners of manufactured homes may buy flood insurance through the National Flood Insurance Program for the full value of the home and its contents.

The National Flood Insurance Reform Act of 1994 requires homeowners in participating communities who have received disaster-assistance grants in the past to purchase and maintain flood insurance for the life of the property. Otherwise, they may not be eligible for certain types of disaster assistance in the future.

Flood insurance policyholders in high-risk areas (Special Flood Hazard Areas) can get up to $15,000 to help pay the cost to bring homes or businesses into compliance with their community's floodplain ordinance.

Owners may decide to :

Flood insurance saves taxpayers millions of dollars when floods hit communities, because the payouts for NFIP to flood victims come from insurance premiums paid by policyholders, not from the federal taxpayer.

Last Modified: Monday, 08-Dec-2003 11:02:58