Time for homeowners to get flood insurance

Mike Branchik returns to dry land using makeshift walkway from his home as Illinois River flooded homes April 23, 2013, in Peoria Heights, Ill. AP

(MoneyWatch) The biggest natural threat to homes is flooding, according to the Federal Emergency Management Agency. Here's what that's a concern this year: This hurricane season is projected to be a big one, meteorologists at the University of Colorado say. And their analysis indicates that that the tropical Atlantic has warmed up more than usual, creating a higher probability that a major hurricane will reach landfall this season.

Most homeowners lack flood insurance, while no standard home insurance policy covers damage to your home and personal property due to flood. With the average residential claim for flood damage running at about $30,000, leaving this risk uninsured can be costly.

Homeowners in flood zones can buy flood insurance under FEMA's National Flood Insurance Program. Any claims are usually serviced by your insurance company.

Flood insurance costs vary depending on how much coverage is purchased, what it covers and the property's flood risk. Most policies can be bought with minimum coverage of $20,000 for the home and $8,000 for contents. The maximum coverage for losses due to flooding is $250,000 to the building and $100,000 for loss of covered contents.

A key point: Losses are covered on the basis of actual cash, not replacement, value. If you need more flood insurance coverage, you'll have to get it through private insurers and will have to check for companies in your state that can provide policies with higher coverage limits. (Use the Flood Risk Profile tool at Floodsmart.gov to get an estimate for flood insurance on your home and for a list of agents in your local area who provide it.)

There are some things flood damage does not cover, such as mold or mildew damage that have been reasonably avoided by the property owner. Other items not covered include:

- The loss of cash, precious metals and valuable papers, such as stock certificates

- Property and belongings outside of an insured building, such as trees, plants, wells, septic systems, walks, decks, patios, fences, seawalls, hot tubs and swimming pools

- Living expenses, such as temporary housing

- Most self-propelled vehicles such as cars and motorcycles

If you own property, a home or a vacation home that is near water or in a hurricane zone, then you need to get informed quickly. Hurricane season, the time of year when conditions are ripe for spawning tropical storms and super-storms, starts June 1 and runs through October.

But unlike typical insurance, where you can bind coverage by submitting an application with a check, flood insurance works differently. There's a 30-day waiting period for coverage to begin after submitting the application and the payment. So if you want to coverage for flood damage to begin before June, then you'll need to apply now.

  • Ray Martin

    Since 1986, Ray Martin has been a practicing financial counselor, providing valuable and practical financial guidance and advice to individuals. He has appeared regularly as a contributor on the CBS Early Show, CBS NewsPath, as a columnist on CBS Moneywatch, and on NBC-TV's morning newscast TODAY. He has also appeared on the Oprah Winfrey Show and is the author of two books.

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