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Buy flood insurance before the water rises

It's flood season again.

Hurricane season started June 1, and coastal dwellers are buying batteries and stocking up on bungee cords.

But don't dismiss the risk of flooding if your home isn't near the shore. Witness recent events throughout the Northeast, where thousands of people were forced to evacuate their homes due to rising river waters. Normally high and dry parts of Maryland, Pennsylvania, New Jersey, New York, Ohio and Washington, D.C., were inundated.

Floods happen in all 50 states, according to the Federal Insurance Administration. FIA says 25 percent of all flood insurance claims occur in areas that have a low or moderate flood risk.

Standard homeowners insurance doesn't cover flooding, but a survey, conducted for the Chubb Group of Insurance Companies by Opinion Research Corp., found that only 14 percent of Americans have purchased a flood insurance policy on their principal residence.

It's an oversight that could cost you big time. An inland flash flood can bring a wall of water 10 feet high. Less than an inch of water in the basement will ruin flooring and damage vital home systems. Less than two feet in the driveway can carry away your car.

The National Flood Insurance Program was set up in 1968 to help homeowners in flood-vulnerable areas get flood insurance at a reasonable rate. It operates within the Federal Emergency Management Agency but is sold and serviced by private insurers. Homeowners with federally insured mortgages must purchase it. Others who live in vulnerable areas can buy it.

Right now, the flood insurance program is under congressional scrutiny. So far, it has $24 billion in claims from hurricanes Katrina and Rita, with more expected to trickle in. That's more than the total of all claims paid in the history of the program.

Congress is currently retooling flood insurance in order to help keep it solvent. Versions have passed both the Senate and the House, but a compromise is still in the making. The bill, undoubtedly, will pass soon, because additional borrowing power to pay the 2005 hurricane claims hinges on that.

But if flooding might be in your future, don't wait around for Congress to act. A flood policy takes 30 days to go into effect. Buy today and the policy will begin to cover your property in a month.

Meanwhile, if you don't have a policy, there are some things to consider.

Flood facts
Flood insurance isn't mandatory for very many people. Generally, the only borrowers now required to buy flood insurance by their mortgage companies are those living in high-risk, 1-in-100-year flood zones whose loans are federally backed.

A misnomer of sorts, the "1-in-100-year flood zone" simply means that a flood has a 1 percent chance of occurring in any given year. But the chances of a loss occurring over a 10- or 20-year period increase dramatically. For instance, the chance of having a 1-in-100-year loss over a 10-year period is more than 9 percent. Over a 20-year period, that probability jumps to about 18 percent, according to AIR Worldwide Corp., a risk-modeling company that helps clients manage the financial impact of catastrophes and weather. Over the life of a 30-year mortgage, there's a 26 percent chance of a flood occurring in such a zone.

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