|Buy flood insurance before the water
The new legislation would expand the current mandatory
purchase rules to include all flood-zone loans, rather than just
those with federal backing. And it also would mandate coverage for
those living in levee-protected areas.
"People will be required to purchase flood insurance
who never previously thought about needing it. It will bring more
people into the program, spread the risk and keep costs low for
those who can't afford coverage," says Charles E. Symington
Jr., senior vice president for government affairs and federal relations
for the Independent Insurance Agents & Brokers of America.
If you live in a 100-year flood plain and have a federally
backed mortgage, you still may not now have flood insurance. That's
because for many people flood insurance seems like an unnecessary
expense -- if you've never lived through a flood and your neighborhood
is dry as a bone, it's hard to believe it will happen.
And many mortgage companies haven't been vigilant
in enforcing the rules, allowing customers to slide. "Even
though people bought policies on the front end, they don't maintain
them," Symington says. "As mortgages are resold in the
secondary market, the policies lapse."
But under the new law, a mortgage company would be
fined for being sloppy -- probably $1,000 per customer. So after
this year, if you are in a flood zone, regardless of whether you
have a federally backed mortgage or a mortgage from a private company,
you'll be forced to actually buy flood insurance, or the mortgage
company will be calling your loan, assuming the bill passes.
Buying flood insurance
While the National Flood Insurance Program underwrites flood insurance,
it's mostly sold and administered by insurers that also sell other
kinds of homeowners insurance. Before you talk to an insurance agent,
you might want to determine your flood
risk. If you are required or eligible to buy a policy (95 percent
of the 19,000 communities identified as having some flood risk participate
in the program), figure out what it will cost you by going to floodsmart.gov.
The insurance company you choose will be the final
arbiter of what you pay. Theoretically, all flood policies cost
the same, but Steve Kanstoroom, who runs a Web
site that helps flood victims get the most from their flood
insurance policy, says different companies interpret the rules differently,
and a buyer often can save a little by shopping around.
There isn't exactly a smorgasbord of flood insurance
choices. You choose between basic, which covers structure only,
or buying insurance on a home's contents, as well. In certain high-risk
areas, coverage on contents isn't available for basements -- unless
it is a walkout basement, in which case, by federal definition,
it isn't really a basement.
Structure coverage includes furnaces, hot water heaters,
an electric panel, permanently installed flooring and some other
things that you might have thought would be contents, such as certain
appliances. It doesn't include furnishings -- those are definitely