The Changing Rules of Flood Insurance
New maps may put your home in the zone for flood insurance.
Flood insurance doesn't grab the headlines like, say, health-care reform does. Yet it's got all the elements of a front-burner issue. Inland homeowners caught by surprise by the recent deluges in Tennessee and New England are angry that they weren't sold flood insurance, while communities across the country are up in arms as new flood maps sweep them into insurance-required zones.
Meanwhile, questions swirl about the future solvency of the federal government-run insurance program, which covers 5.5 million properties. Intended to be supported by policy premiums, it now owes Uncle Sam almost $19 billion. And although Washington politicians debate badly needed long-term reforms, the program limps along on successive rounds of short-term funding. In the past year, the National Flood Insurance Program has lapsed (meaning no policies could be sold) three times. The most recent interruption came in June, just as hurricane season opened with forecasters calling for three to seven major storms this year.
Don't be put off by all the noise. This is a great time to consider flood insurance. Flooding isn't covered by most homeowners policies, and insurance may be more affordable than you think -- especially given the high cost of fixing flood damage. You must carry flood insurance if you have a federally backed mortgage and your home is in a high-risk zone -- defined as having a 26% chance of flooding within a 30-year period, or 1% annually. Flood insurance is optional if you don't have a mortgage or you live in a less risky area, but it's an option you should consider because 25% of all flood claims are made in areas of low to moderate risk.
![https://cdn.mos.cms.futurecdn.net/hwgJ7osrMtUWhk5koeVme7-200-80.png](https://cdn.mos.cms.futurecdn.net/hwgJ7osrMtUWhk5koeVme7-320-80.png)
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Even though the flood-insurance program is run by the feds, you purchase a policy through an insurance agent at one of some 90 companies nationwide, including Allstate, State Farm and USAA. Your community must participate in the NFIP (more than 20,000 do). You don't have to comparison-shop because the rates are set by Uncle Sam (see estimated premiums and find an agent at www.floodsmart.gov).
A home that's in a low-risk zone may qualify for a preferred rate, with annual premiums ranging from $119 to $395 to protect both the home and its contents, depending on how much coverage you buy. Standard rates in a high-risk area start at $477 and go up to $2,633 a year. Coverage for basements is limited. You can insure your home for up to $250,000 and its contents for up to $100,000; renters can buy contents-only coverage. If you want insurance beyond what the NFIP provides, you must buy "excess" coverage from a private insurer, such as Fireman's Fund or Chubb.
Don't be upset if an updated flood map draws you into a higher-risk zone. A bigger worry is that an outdated map might conceal your true risk. (You can see whether your map is scheduled for review or has recently been updated at www.floodsmart.gov.) Buy a policy before the new map becomes effective, which can take a few weeks to several months, and you'll lock in the lower rates associated with the lower-risk zone. Don't wait until you hear raindrops on the roof: Policies take 30 days to go into effect.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
Anne Kates Smith brings Wall Street to Main Street, with decades of experience covering investments and personal finance for real people trying to navigate fast-changing markets, preserve financial security or plan for the future. She oversees the magazine's investing coverage, authors Kiplinger’s biannual stock-market outlooks and writes the "Your Mind and Your Money" column, a take on behavioral finance and how investors can get out of their own way. Smith began her journalism career as a writer and columnist for USA Today. Prior to joining Kiplinger, she was a senior editor at U.S. News & World Report and a contributing columnist for TheStreet. Smith is a graduate of St. John's College in Annapolis, Md., the third-oldest college in America.
-
5 Stocks to Buy for a Trump Presidency
The race for the White House is heating up and these five stocks are set to benefit if Donald Trump claims victory.
By Will Ashworth Published
-
6 Target-Date Funds to Buy For Your Retirement
These six target-date funds are good set-it-and-forget-it options that are a staple of retirement plans.
By Nellie S. Huang Published
-
403(b) Contribution Limits for 2024: Good News for Teachers
retirement plans Teachers and nonprofit workers can contribute more to a 403(b) retirement plan in 2024 than they could in 2023.
By Jackie Stewart Last updated
-
Roth IRA Contribution Limits for 2024
Roth IRAs Roth IRA contribution limits have gone up for 2024. Here's what you need to know.
By Jackie Stewart Last updated
-
Four Tips for Renting Out Your Home on Airbnb
real estate Here's what you should know before listing your home on Airbnb.
By Miriam Cross Published
-
Five Ways to a Cheap Last-Minute Vacation
Travel It is possible to pull off a cheap last-minute vacation. Here are some tips to make it happen.
By Vaishali Varu Last updated
-
How to Figure Out How Much Life Insurance You Need
insurance Instead of relying on rules of thumb, you’re better off taking a systematic approach to figuring your life insurance needs.
By Kimberly Lankford Last updated
-
When Is Amazon Prime Day?
Amazon Prime Amazon Prime Day 2024 runs Tuesday July 16 and Wednesday July 17, marking the 10th Prime Day event.
By Bob Niedt Last updated
-
How to Shop for Life Insurance in 3 Easy Steps
insurance Shopping for life insurance? You may be able to estimate how much you need online, but that's just the start of your search.
By Kaitlin Pitsker Published
-
Five Ways to Shop for a Low Mortgage Rate
Becoming a Homeowner Mortgage rates are high this year, but you can still find an affordable loan with these tips.
By Daniel Bortz Last updated