Misconceptions Prevent Purchase of Flood Insurance 

Release Date: July 19, 2007
Release Number: 1700-037

» More Information on Connecticut Severe Storms and Flooding

Windsor, Conn. -- Despite the fact that destructive flooding regularly occurs in Connecticut, only 2 percent of Connecticut residents have flood insurance. Some may not be purchasing insurance due to a number of misconceptions about the National Flood Insurance Program (NFIP).

"Sometimes people are given wrong information, such as that their property isn't eligible for flood insurance when it is," said Mike Parker, federal coordinating officer with the Department of Homeland Security's Federal Emergency Management Agency (FEMA). FEMA administers the NFIP. "I urge everyone to visit the FloodSmart.gov Web site or speak with an insurance agent who sells flood insurance to get accurate information about their risk and the insurance policies that are available."

Misinformation about flood risk and the NFIP falls into several categories, including misconceptions about who can buy flood insurance, about the need for flood insurance, about flood insurance coverage and about the NFIP.

"Flood insurance helps Connecticut residents protect their assets and our state's overall economic health in the event of floods," said Governor M. Jodi Rell. "I urge people to educate themselves about flood risk and flood insurance and make wise choices to protect their family's financial health."

Misconceptions about Who Can Buy Flood Insurance

Misconception: You can't buy flood insurance if you are located in a high risk flood area.

Fact: In Connecticut, you can buy flood insurance through the NFIP no matter where you live except in Coastal Barrier Resources System (CBRS) areas.

For property located in a Special Flood Hazard Area (SFHA) -- an area with a 1 percent chance of flooding in any year -- lenders must require borrowers to purchase flood insurance as a condition of receiving a federally-backed mortgage loan.

Misconception: You can't buy flood insurance immediately before or during a flood.

Fact: You can purchase flood insurance at any time. There is usually a 30-day waiting period after you've applied and paid the premium before the policy is effective.

Misconception: Flood insurance is only available for homeowners.

Fact: Flood insurance can provide up to $100,000 of coverage for the contents of any residential building, which includes the contents of a renter's residence.

Misconception: You can't buy flood insurance if your property has been flooded.

Fact: It doesn't matter if your home, apartment, or business has flooded. You are still eligible to purchase flood insurance for property anywhere in Connecticut except in a Coastal Barrier Resources System (CBRS) area.

Misconceptions about the Need for Flood Insurance

Misconception: Homeowners insurance will pay to repair and replace property that is damaged by flooding.

Fact: Unfortunately, many homeowners do not find out until it is too late that their standard homeowners policy excludes any coverage due to water damage from flooding.

Misconception: Only residents of high risk flood zones need to insure their property.

Fact: One-third of NFIP insurance claims involve property not located in an area identified as a high risk zone. Even if you live in an area which is not flood-prone, it's advisable to have flood insurance. Flooding can be caused by snow melt, dam breach, extremely heavy rain fall, new development which decreases ground absorption of water, or a hurricane. The NFIP's Preferred Risk Policy, available for as little as $80 per year, is designed for residential properties located in low-to-moderate flood risk zones.

Misconception: If you live in the "100-year floodplain," that means there is only going to be one big flood every 100 years. You don't really need insurance, since the flood risk is relatively small.

Fact: NFIP now calls areas where flooding is most likely to occur "Special Flood Hazard Areas." Previously, NFIP described these areas as the "100-year floodplain," a term that continues to cause confusion.

The term "100-year floodplain" does not mean there will only be one big flood in 100 years. It means that every single year there is a 1-in-100 chance of a flood. Sometimes there are two severe floods only a few years apart in these areas.

Misconception: Only property located in a "floodplain" needs flood insurance.

Fact: Some 40 percent of flooding insurance claims occurs in areas not readily recognized as being vulnerable to flooding. They are generally not located near a river or other body of water, according to the Floodplain Management Association, a non-profit organization with government and industry members. To assess your property's flood risk, go to www.Floodsmart.gov.

Misconception: Federal disaster assistance will pay for flood damage.

Fact: Before a community is eligible for disaster assistance, it must receive a federal disaster declaration. Declarations occur in less than 50 percent of flooding incidents. Even if federal grants are available, not everyone is eligible; if there is a grant, the amount may be less than needed to complete repairs and replace property. The annual premium on an NFIP insurance policy will generally be far less expensive than repaying a federal disaster loan. Furthermore, if you are uninsured and receive federal disaster assistance after a flood, you must purchase flood insurance to be eligible for any future federal disaster aid.

Misconceptions about Flood Insurance Coverage

Misconception: Flood insurance doesn't cover flooding in basements.

Fact: Yes, it does. The NFIP defines a basement as any area of a building with a floor which is sub-grade, or below ground level on all sides. An NFIP policy covers basement cleanup expenses and items used to service the building, such as furnaces, hot water heaters, washers and dryers, air conditioners, freezers, utility connections, circuit breaker boxes, pumps, elevators and tanks used in solar energy systems. What the policy does not cover is the contents of a finished basement and any improvements such as finished walls, floors, and ceilings.

Misconception: The NFIP does not cover flooding resulting from hurricanes, or the overflow of rivers or tidal waters.

Fact: NFIP flood insurance covers many instances of flooding caused by hurricanes as well rivers overflowing or tidal surges. 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 adjacent properties or two or more acres must be affected. Covered flooding can be caused by any one of the following:

Misconceptions about the NFIP Program

Misconception: The NFIP encourages coastal development.

Fact: The NFIP does not encourage coastal development. The Coastal Barrier Resources Act of 1982 prohibits the sale of flood insurance in designated fragile coastal areas. The law does not prohibit property owners from building along a coast; however, it prevents transferring any financial risk of such building to the federal government.

In addition, one of the NFIP's primary objectives is to minimize the impact of structures that are built in Special Flood Hazard Areas (SFHA) by requiring them not to obstruct the natural flow of floodwaters. Also, structures built within SFHAs must adhere to strict floodplain management regulations.

Misconception: It's impossible to find an insurance agent who sells flood insurance.

Fact: While it is true that not all insurance agents sell flood insurance, many agents do. To find agents who sell flood insurance in any area, look on the www.FloodSmart.gov Web site or call the FloodSmart toll-free phone number, 1-800-427-4661.

Misconception: Flood insurance is too expensive. I can't afford it.

Fact: As with any type of property insurance, the premium depends on the degree of risk for the particular property and the amount of insurance coverage you need. To find out what your premium for flood insurance would be, go to the FloodSmart.gov Web site and enter the address of your property.

FEMA coordinates the federal government's role in preparing for, preventing, mitigating the effects of, responding to and recovering from all domestic disasters whether natural or man-made, including acts of terror. FEMA administers the National Flood Insurance Program through its Federal Insurance Administration.

Last Modified: Thursday, 19-Jul-2007 10:12:50