Flood Insurance

July 1993

The rain began to fall...and fall...and fall.  By the time the rain ended over 17,000 square miles were under water because of the overflowing Mississippi, Missouri, and tributary rivers.  Twenty-six people died.  With over $8 billion in damage, 200 counties were declared federal disaster areas.  Only about 25 percent of the flood victims carried flood insurance--the rest were on their own.  But the real lesson of this flood is what happened in the following years.  The Midwest was subject to flooding of the same magnitude in both 1995 and 1996.

FEMA

Flooding as a national problem

Until the late 1960s, most property owners were unable to get insurance against flood damage.  Private insurance firms, aware of the potential for catastrophic losses were unwilling to assume the financial risk.  This put the burden on taxpayers to provide costly disaster relief to a growing number of flood victims.

In 1968, Congress addressed this issue by creating the National Flood Insurance Program (NFIP). This federal program provides flood insurance at a reasonable cost in exchange for the careful management of flood-prone areas by local communities.

Today the NFIP serves over 4 million customers in over 18,000 communities across the country.  It is administered by the Federal Emergency Management Agency (FEMA) through its Federal Insurance Administration.  To become eligible, a community first enters the emergency phase of the NFIP by adopting preliminary actions to reduce the threat of flooding.  Everyone in the community can then apply for limited amounts of flood insurance at federally subsidized rates.

Much higher levels of insurance become available when a community qualifies for the regular phase of the program.  This occurs after FEMA has conducted a detailed flood study and local officials have enacted more stringent measures to safeguard life and property from future flooding.  To find out whether your community is eligible, ask your Farmers Insurance agent.

The truth about flood insurance

Myth: "It won't happen to me"

Fact: You don't have to live by water to be at risk.  Approximately 30 percent of all flood claims occur in low-to-moderate risk areas.

Myth: "My Homeowners insurance is enough"

Fact: Homeowners insurance does not cover flood damage--federal flood insurance does.  Flood insurance also covers mudflow, dirt, and debris resulting from moving water.

Myth: "I don't need flood insurance."

Fact: Homeowners with mortgaged property in a Special Flood Hazard Areas (SFHA) are now required by federal law to obtain flood insurance.  Lenders must comply by requiring flood insurance on the outstanding mortgage balance for the life of the loan.

Myth: "The government will pay."

Fact: To receive federal disaster assistance, a flood must first be declared a "federal disaster" by the US President.  Less than 50 percent of the floods that damage homes across the country every year wind up being classified a federal disaster.

Myth: "Flood insurance is expensive."

Fact: Flood insurance is affordable.  Flood damage is not.  The average loss of property and contents from the 1993 Midwest flood was more than $25,000.  Compare this to the average annual flood premuim of just over $300.

Your coverage is based on your home's value.  Flood insurance up to $25,000 is available for residential  buildings.  Since Flood policies are backed by the U.S. government, all valid claims are 100 percent guaranteed!

Myth: "Flood insurance covers contents."

Fact: Standard flood coverage does not cover the contents of your home.  Separate Contents Coverage is available up to $100,000.  Preferred Risk Policies for structures in low-risk areas offer a comibination up to $250,000 for a residence and $60,000 for its contents.

Myth: "I can buy flood insurance anytime."

Fact: There is generally a 30-day waiting period for flood insurance.  So the best way to protect your home is to act now--before the flood comes.

Contact us for more information