If you are like most owners of residential or commercial property, you probably understand the need to maintain adequate hazard insurance protection. If the property is financed, it really isn’t even a choice because the lender requires proper coverage to be maintained at all times.
That critical insurance policy may even make you think you are fully protected for almost any unfortunate event—and most of the time you are—however, there may be key situations where you are still at risk.
Do you know the facts about flood insurance?
Many people overlook the need for flood insurance, thinking that a hurricane or a major storm isn’t likely to affect their property. However, those are not the only factors that can lead to flooding of your home or business.
You should consider that a disastrous event is typically deemed a ‘flood’ when there is too much water on an area that is normally dry. In fact, the National Flood Insurance Program (NFIP), a government organization managed by the Federal Emergency Management Agency (FEMA), defines a flood as “a general and temporary condition of partial or complete inundation of two or more acres of normally dry land or of two or more properties from:
Overflow of inland or tidal waters,
Unusual and rapid accumulation or runoff of surface waters from any source,
Mudflow (a river of liquid and flowing mud on a normally dry land area), or
Collapse or subsidence of land along the shore of a lake or similar body of water caused by erosion or undermining caused by waves or currents of water exceeding anticipated cyclical levels.
Obviously if you live near or have a business located close to a river or other body of water, you may be familiar with the situations noted above. However, it is the “unusual and rapid accumulation or runoff of surface waters” that many people do not think about.
This source of flooding can happen in areas where you least expect it and for a variety of reasons; for example, when a dry creek overflows during a heavy rain storm or a neighbor’s water pipe breaks causing damage to your home. In those situations, the damage is not covered by your homeowners’ insurance policy or your business property coverage. Generally, physical damage to your building or personal property “directly” caused by a flood is covered by a separate flood insurance policy.
Flood Zones and Mapping
Clearly some geographic regions are in more danger of flooding than others. To help with consistent identification of areas at risk, FEMA created and maintains flood zone maps. These maps help to define whether a flood policy is suggested or required based upon whether the property is in a low, medium, or high risk area. They also directly affect the rates that the property owner will pay for flood coverage.
The maps are periodically updated, and in recent years, we’ve seen revised flood mapping indicating that flooding can occur just about anywhere in the United States. As a property owner, you should know that your requirement for flood coverage can change with these mapping revisions.
Be Prepared in 2010
Major map revisions are underway, and insurance agents are paying close attention to map boundaries being redrawn in San Antonio, Bexar County and throughout Texas in 2010. Even though you may not need flood coverage now, once new map guidelines are in place, you may very well find out your property now sits in a designated flood plain and will require additional protection.
If you are going to need flood insurance there are two important things you need to know. The first is that there is a 30-day waiting period after you purchase a new flood policy for the coverage to become effective. You can not wait until the storm of the century hits to buy a policy because you won’t be protected.
The second is that flood insurance rates are very reasonable if you are in a preferred zone where the risk is currently considered low. However, rates can be somewhat expensive if you are in—or are moved into—a required coverage zone.
Since we know new maps are about to be released, this is a great time to check with your insurance agent, especially if you are currently in a preferred zone. If you purchase flood coverage now, you may be eligible to maintain that preferred status when and if your property ends up in a flood zone once new maps go into effect. In other words, your rates will be grandfathered for as long as you own the property, which could save you hundreds of dollars in premium annually.
While no one knows all the intricacies of how to prepare for the unknown, we do know this year, more than ever, commercial and residential property owners really need to understand and follow the nuances of flood insurance coverage and monitor properties for situations that could turn catastrophic.
