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Money npul
5 myths about flood insurance
When my basement flooded this spring, I learned the hard way about what my policy
did not cover. Turns out, I was lucky. But flood victims like the McCoys weren't. Read on.
BY SHARON EPPERSON
DORA AND LARRY McCOY bought their Lane, Kan.,
home five years ago directly from the sellers. They
didn’t take out a mortgage and didn’t think they
would need flood insurance. Then, on June 29, af
ter heavy rains pummeled their one-story home, water from a
nearby creek overflowed, seeped into the basement and rose
almost to the ceiling. The damage was too severe to repair, and
the house was demolished. “I went from owning a home to be-
ing in debt,” Dora says. “They make flood insurance
so high, most people around here don’t have it”
People make a lot of assumptions about flood in
surance, and those misconceptions can be costly. Here
are five myths and the facts:
MYTH: I have homeowner's insurance and
don't live in a flood zone, so I don't need it
Fact: This summer, Kansas, Missouri and Okla
homa residents suffered terrible flooding, and many
were miles from the nearest river. “Flooding can happen any
where. It has happened in every part of this country in the
past 12 months,” says David Maurstad, of the Federal Emer
gency Management Agency, which runs the National Flood In
surance Program (NFIP).
Homeowner’s insurance policies do not cover flooding. A
separate policy is needed and can be purchased from an in
surance agent or directly through NFIP, which administers the
program. More than 20,300 communities nationwide participate
in NFIP. So most, but not all, homeowners qualify for flood in
surance. Check the “Community Status Book” at fema.gov to
find out whether your area participates. Then, go to floodsmart
gov and click on “What’s your flood risk?” to determine your
odds and find a local agent.
MYTH: Flood insurance is pricey.
Fact: For fairly low-risk areas, lower-cost “preferred-risk” pre
miums covering the building and personal belongings can start
as low as sll2 per year. Fbll coverage, including $250,000 of build-
CNBC correspondent Sharon Epperson is the author o/The Big Payoff:
8 Steps Couples Can Take to Make the Most of Their Money -
And Live Richly Ever After” fCoixixs, *22.941.
18
USA WEEKEND • Sept. 7-9, 2007
ing and SIOO,OOO of contents coverage, costs $317 per year, or
less than S3O per month. The nationwide average for flood in
surance coverage is less than SSOO annually. That’s often less
than interest on a federal disaster loan, plus you don’t have to
repay the money.
MYTH: Federal disaster assistance will cover damage.
Fact: Don’t count on it. “A community must be declared a fed
eral disaster area before it is eligible for disaster assistance,”
says Bob Rusbuldt, of the Independent Insurance
Agents & Brokers of America. “Federal disaster as
sistance declarations are awarded in less than 50%
of flooding incidents.”
You can live
on high land
and still get
hit by water
damage.
MYTH: My lender didn't require flood insurance,
so I don't need it.
Fact: Lenders should notify borrowers in special flood
hazard areas that they’re eligible for flood
insurance. But floodwaters don’t stop
at a line on a map. “One-third of flood insur
ance claims in a given year come from low- .
to moderate-risk areas,” Maurstad says,
Even in low-risk areas, ice jams, melt- Jgi
ing snow and inadequate draining
systems can wreak havoc. ts&f&xk
MYTH: Flood insurance m
will cover the entire house, Vj
including the basement.
Fact: Comprehensive flood cov- \fl
erage should include two policies: W
one for the structure and one for
the contents of the home. Yet, most
contents in the basement are not cov
ered, as I discovered when my home
was flooded after heavy rains this
spring. Basement contents coverage
includes the washer and dryer, but it
does not include finished walls,
carpeting, floors, furniture or
personal belongings, ca m
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