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Think You Don't Need Flood Insurance? Think Again

Flash flooding from intense storms over central Texas and Oklahoma over the past week has brought images of rivers and bayous overflowing their banks, streets inundated with water, homes floating off their foundations, and cars set adrift.

In Houston, more than 4,000 homes have been damaged by the muddy waters so far, officials say. Rebuilding those homes will take months, if not a year or more. But some homeowners may not get all the help they'll need, because they don't have flood insurance.

While homeowners in high-risk flood plain zones are required to buy flood insurance, others should consider buying it, too. More than 5.5 million homeowners in more than 21,000 communities across the U.S. already do, according to the Federal Emergency Management Agency.

"Anywhere it can rain, it can flood. When you consider that, and what's going on in Texas, which was in the midst of a drought until last week -- homeowner's insurance policies do not include flood damage," says David Schein, a regional flood insurance specialist for FEMA.

"You don't have to be in a high-hazard area to flood. We pay claims for the obvious: a stream, creek, river coming over its banks. However, in an urban environment that's paved, the water can be just ponding, or pooling on its way into the stream. That can be a covered claim, water flowing over the land."

Why buy flood insurance?

Floods are the most common weather emergency in the U.S., according to FEMA, and they usually strike without warning. Flooding can result from hurricanes, tropical storms, cyclones, plain old heavy rains, winter storms, spring thaws, overburdened or clogged drainage systems, or occasionally from nearby construction. The increased development of buildings, parking lots, and roads has made flooding more severe throughout the country, FEMA says.

You can live miles away from water and still be a victim of flooding. It takes only a few inches of floodwater to cause tens of thousands of dollars in damage, according to FEMA.

And don't assume that federal disaster assistance will bail you out when there's a flood. It's helpful to homeowners only when the U.S. president declares a state of emergency -- and is usually a loan that must be repaid with interest, FEMA notes. Flood insurance policies pay out on qualifying claims whether or not a federal disaster is declared.

What kind of risks am I running?

High-risk flood zones: Insurance required

People buying homes in certain designated flood hazard areas are required by FEMA to purchase flood insurance before getting a home loan from federally regulated or insured lenders. High-risk areas are those declared to have at least a 25% chance of flooding during the typical 30-year mortgage. FEMA estimates there are about 30 million structures, both residential and commercial, in that position nationwide. There's less risk of a structural fire in your home, Schein notes (about 10%, over a 30-year mortgage), yet no one questions the need for fire insurance. You can find out if you're in a flood zone or get a full breakdown of high-risk subcategories.

Low- to moderate-risk flood zones: Still recommended

Homeowners who aren't close to a body of water may still want to consider buying flood insurance. About 25% to 30% of flood insurance claims come from areas that have less than a 1% annual chance of flooding, according to FEMA. The agency still recommends flood insurance in these low- to medium-risk areas, and in fact homeowners and businesses there might be eligible for a lower-cost preferred risk policy.

You can find out your property's level of risk at FloodSmart.gov. This can help you assess your potential flood insurance premium.

How to get insurance and what it'll cost you

Flood insurance is available in more than 22,000 communities that participate in the National Flood Insurance Program, created more than 45 years ago. The program requires certain flood plain management initiatives in high-hazard areas. However, it also offers policies outside of flood plains, whether or not your property has flooded before.

"What we're hearing from our offices in Texas is that a lot of people who had major damage are quite far outside the mapped flood area," Schein says, adding that it's not terribly unusual. "We hear heartbreaking stories all the time. We hear, 'My insurance agent told me I don't need it.' What the agent should have said, or meant to say, is: 'The bank is probably not going to require it.' That's not the same thing."

Premiums vary depending on the date of construction and relative risk of the area -- they average $550 per year -- and most policies have a 30-day waiting period before coverage begins (that's so you don't take out a policy as you see the waters rising). Homeowners can purchase up to $250,000 in coverage for their home. Separate coverage is available for its contents, of up to $100,000 for homeowners or renters. Residential condominium associations can purchase up to $250,000 of coverage for each eligible unit, or the replacement cost of the building, whichever is less.

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