Flood Insurance
The Henssler Financial Group Position Paper

As you know, flooding caused by Hurricane Katrina's damage to the levees devastated the New Orleans area. The rising waters gave homeowners little time to react, and many had to seek safety on their rooftops. If they were lucky, only personal property was lost, and hopefully they had flood insurance. Not all floods are as devastating as those caused by Hurricane Katrina. Likewise, not all floods occur in high-risk areas. No matter where you live, you may want to consider flood insurance for your home.

What is a Flood?

Let us first define what a flood is. Basically, a flood is excess water or mud on normally dry land. It does not have to be ten feet of water that forces you to climb to your rooftop. A flood can simply be a few inches of water in your home. You may not be devastated by it, but you could lose a lot of personal property. Just a few inches of water can ruin carpet, hardwood floors, and/or other floor coverings. Damaged drywall and baseboard molding would need replacing. A flood that reaches ten inches may also destroy furniture, floor lamps, appliances, bookshelves, cabinets and so on.

A flood can be caused by overflowing bodies of water. Lakes and rivers can spill over into surrounding communities when there is a heavy rainfall or melting snow. Flash floods can occur anywhere that a large amount of rain falls in a short period of time. As land becomes increasingly covered by more asphalt, we lose more and more of the ground's natural ability to absorb water making flooding more probable. Inadequate drainage systems and broken dams or levees can also cause flooding.

What is Flood Insurance?

Flood insurance helps protect homeowners and renters against loss of personal property in the event of a flood. Homeowner's insurance and renter's insurance specifically excludes providing coverage for damages caused by flooding. Flood insurance may be required if you live in area exposed to a high risk of flooding, but it is also available to anyone living in a community that participates in the National Flood Insurance Program.

What is the National Flood Insurance Program?

Congress created the National Flood Insurance Program (NFIP) in 1968. The purpose of the NFIP was to reduce the taxpayers' cost of providing disaster relief for flood victims. Communities participate in the program by using floodplain management ordinances and in return NFIP makes flood insurance available to homeowners, renters, and businesses. Many communities in Georgia participate. Go to http://www.fema.gov/fema/csb.shtm to see if your community participates.

How is Flood Insurance Obtained?

You can inquire about flood insurance with your homeowner's insurance agent. If your agent cannot help you, go to http://www.fema.gov/nfipInsurance/companies.jsp to find a local agent in your area.

How Much does Flood Insurance Cost?

According to the Federal Emergency Management Agency (FEMA), the average cost of flood insurance is a little more than $400 per year. However, the cost can vary greatly depending on the amount of coverage you are seeking and what flood zone you live in.

What does Flood Insurance Cover?

Flood insurance can provide coverage for the replacement cost of the building property up to $250,000 and personal property up to $100,000. Both types of coverage are recommended for homeowners and business owners. Renters can purchase coverage for personal property.

What is a Preferred Risk Policy?

A Preferred Risk Policy provides flood insurance to homes, apartments and businesses located in low-to-moderate risk areas at a lower cost. Ask your agent if you qualify.

Bottom Line

Although you may not feel that your home is at risk for flooding, according to the FEMA web site, 25% of all flood claims occur in the low-to-moderate risk areas. Flood insurance may provide additional peace of mind when you consider that your homeowner's insurance specifically excludes flood damage. You may find that flood insurance is not very expensive if you live in a low- risk area. For properties that are at risk, you should look into obtaining flood insurance if you have not already. For more information, go to http://www.fema.gov/business/nfip/ or contact The Henssler Financial Group at 770-429-9166 or comments@henssler.com.