Immerse Yourself in This Primer on Flood Insurance
Remember that scene in “Titanic” when the ocean water starts swirling up the ship’s grand circular staircase?
Picture all that water in your home and you’ll know what a major flood would be like.
Flooding can be just as destructive as an earthquake or fire and is far more common. In the first three months of this year, 41 of the 58 counties were declared flood disaster areas.
The frequency of flooding in California underscores the importance of having flood insurance. And while the 1997-98 flood season is coming to a close, Southern Californians haven’t seen the last of floods or, for that matter, El Nino.
The drier days of spring offer a chance to study up on flood insurance and to plan ahead for what’s undoubtedly to come.
What’s more, homeowners in 14 communities along the Los Angeles River have an added incentive to buy flood insurance soon because the Federal Emergency Management Agency will establish new flood zone maps--and higher flood insurance premiums--for those areas on July 6.
Some homeowners who weren’t required to buy flood insurance will need it when the new maps become effective. Homeowners who buy before July 6 can lock in a significant price break.
Flood insurance is readily available in nearly every Southland community, thanks to the National Flood Insurance Program, managed by FEMA.
Flood insurance won’t enable you to rebuild your home and replace your belongings exactly as they were before the deluge, but you’ll be far better off financially with an insurance claim check than you would with a disaster relief grant, restricted to low-income families or individuals, or a government loan that you’ll have to repay.
A flood insurance policy is a complex legal document. Though this primer outlines the basics, you should call your insurance agent for specific information applicable to your situation.
Question: What exactly is a flood?
Answer: According to FEMA’s technical definition, a flood is “a general and temporary condition of partial or complete inundation of normally dry land area from (1) the overflow of inland or tidal waters, (2) the unusual and rapid accumulation or runoff of surface water from any source or (3) mudslides.”
A flood also is “the collapse or subsidence of land along the shore of a lake or other body of water, as a result of” certain defined events.
Q: What is a “100-year” flood?
A: A 100-year flood is not a flood that happens once every 100 years. This term means there is a 1% possibility that a particular spot will be flooded in any one year. A 50-year flood has a 2% possibility of occurring.
Q: Doesn’t my homeowner’s insurance policy cover flooding?
A: No. Homeowner’s insurance covers water damage from plumbing problems, depending on the cause and circumstances, but losses from flooding are specifically excluded.
Q: If my home is damaged in a flood, the government will give me a fat check to pay for the repairs, right?
A: Wrong. If your home is flooded and your county is declared a federal disaster area, basic emergency assistance (e.g., temporary shelter, food) will be available.
The government also offers grants to low-income individuals and families and loans to help disaster victims who meet certain qualifications. The average grant is less than $2,500.
Loans, which must be repaid, are made by the Small Business Administration.
Q: How can I find out whether my home is in an area prone to flooding?
A: Call an insurance agent who handles residential property and casualty coverage, a mortgage lender or the local agency responsible for flood management in your community. That might be the city building permits department, the department of public works or the flood management district.
Q: My insurance agent says my home is in a special flood hazard area. What does that mean?
A: Flood insurance rates are based on flood maps that are prepared and established by FEMA. The four basic map zones are A, V, B and C.
Zones denoted as “A” are the high-risk flood plains, which are referred to as special flood hazard areas. Zones labeled as “V” are coastal areas. The “V” stands for wave velocity and means that structures in those areas could be damaged by storm-driven waves.
The “B” (moderate) and “C” (minimal) zones have a lower risk of flooding. Newer maps use “X” in place of “B” and “C.”
Flood insurance rate maps can be ordered from FEMA’s Map Service Center at (800) 358-9616.
Q: My home is in a flood hazard area. Do I have to purchase flood insurance?
A: If you have a mortgage that is insured, guaranteed or owned by a federal agency or made by a federally insured lender, you will be required to protect your lender’s interest in your home with flood insurance.
Such mortgages include those that are insured by the Federal Housing Administration, guaranteed by the Department of Veterans Affairs, made by a federally insured bank or thrift or purchased by Freddie Mac or Fannie Mae.
Q: My home is in a flood hazard area, but I’ve paid off my mortgage. Must I purchase flood insurance?
A: No. However, certain types of disaster assistance are available only once in a hazard area, unless the property owner purchases and maintains flood insurance.
“People [in a hazard area who don’t purchase flood insurance] are given one free bite, but they are informed in writing when they receive federal disaster relief that they are in a [a hazard zone] and should have flood insurance and that if they don’t purchase flood insurance and maintain that coverage, they will not be eligible for the same types of federal disaster aid the next time,” said Mark Stevens, public affairs officer in FEMA’s Washington headquarters.
Q: I have a federally related mortgage and my home is in a flood hazard area, but it’s on high ground. Can I get an exemption from the flood insurance requirement?
A: If you can verify that the elevation of your home is significantly higher than the surrounding area, you might not be required to have flood insurance. The burden (and cost) of proof is on you. Contact the local flood district authority for instructions.
Q: My home isn’t in a flood hazard area, so I don’t need flood insurance, right?
A: Wrong. Floods do happen outside of the hazard areas, and nearly 30% of FEMA’s claims come from outside such areas.
“The B, C and X zones are nonspecial flood hazard areas where flood insurance may well be recommended,” Stevens said, “but it’s not required for you to be eligible for a federally insured mortgage loan or certain types of federal disaster assistance.
“We strongly urge people to consider [buying] flood insurance even if they’re not in a flood plain. Just because your home is on one side of the line doesn’t mean you are automatically safe.”
Q: My insurance agent told me flood insurance isn’t available in my community. What does this mean?
A: Flood insurance is available in communities that are participating in the national program. In exchange for having government flood insurance made available to the community’s residents, the community must meet certain flood management requirements. A community does not have to be in a hazard zone to participate in the insurance program.
If your community hasn’t met those requirements and, consequently, isn’t a participant, flood insurance most likely won’t be available.
Q: Which Southern California communities are not participating?
A: The three nonparticipants are Huntington Park in Los Angeles County, Grand Terrace in San Bernardino County and Lemon Grove in San Diego County. Two communities, Chino Hills in San Bernardino County and Laguna Niguel in Orange County, became participants quite recently.
Q: My home is in a beach community. Can I still get flood insurance?
A: Yes, unless your community isn’t participating in the program or your home is practically perched right out over the ocean.
Q: My home is for sale. Do I need to notify the buyer that the home is in a flood hazard area?
A: Effective June 1, a natural hazard disclosure form (or a substitute “local option” form) is required in a real estate transaction in California if a transfer disclosure statement is required and the home is in one of six defined natural hazard areas, including a FEMA-designated flood hazard zone.
Disclosure is a complex area of real estate law. Home sellers and buyers should ask a real estate agent or attorney about flood hazard disclosure and insurance requirements.
Q: Who sells flood insurance?
A: Most residential property and casualty insurance agents sell flood insurance. If you want a quote for your home, call any insurance company or independent agency that writes homeowner’s insurance policies.
Q: How much coverage can I buy?
A: Because the land value isn’t considered a factor in flooding, the basic (structural) coverage is for your home only. Additional coverage can be purchased for your belongings. The maximum amounts are $250,000 for structural coverage and $100,000 for contents coverage.
Condominium associations can purchase up to $250,000 of structural coverage times the number of units. Condominium owners can purchase individual policies as long as the total coverage for their unit doesn’t exceed $250,000. Condominium owners and renters can purchase up to $100,000 of contents coverage.
Q: I’ve turned my basement into a recreation room. Is it covered by my flood insurance?
A: Basements are subject to special rules because these rooms are subterranean. Generally, the structure of the basement and basic contents that normally would be housed in a basement (e.g., a furnace, an oil tank, a clothes washer and dryer) are covered.
However, improvements (carpets, wood paneling) and furniture (a sofa, a television set, a pool table) are not covered. If your home has a basement, ask your insurance agent for details and read your policy carefully.
Q: How much is the annual premium?
A: Premiums vary depending on the amount of risk to which your home is exposed and the amount of coverage you elect to purchase. The average annual national premium for $100,000 of structural coverage is about $300.
Q: Can I shop around for a lower premium?
A: You won’t find lower or higher premiums from different insurance agents or companies because the rates for flood insurance are set by FEMA.
Q: The weather forecast calls for torrential rain tomorrow. I don’t have flood insurance. Can I get a policy today?
A: Yes. However, you won’t be covered for tomorrow’s flood because there is a 30-day waiting period before a new policy becomes effective.
The waiting period is waived if flood insurance is purchased when you obtain, increase, extend or renew a mortgage. If the insurance is initially purchased within a one-year period after a revised FEMA flood map for your area becomes effective, the waiting period is only one day.
Q: I live in a community near the Los Angeles River. Do I need flood insurance?
A: The Army Corps of Engineers and the Los Angeles County Department of Public Works are making improvements to flood channels, bridges and levees along a 21-mile stretch of the Los Angeles River.
The section above Compton Creek should be finished by October 1998, and the section up to Long Beach Boulevard should be done by April 1999. The next section, up to the confluence of the Rio Hondo, should be finished in 2001, and the rest of the project is scheduled to be completed in 2004. Those projections depend on congressional funding, however.
FEMA will establish new maps for the affected communities on July 6.
Some homes that were not in a flood hazard area will be in such an area when the new maps are released. “Until the renovation is completed, communities that the levee system was supposed to protect are facing temporary vulnerability,” Stevens said. “Flood insurance will be required for [some] people who did not have to have flood insurance before.”
Q: Which communities are affected by the Los Angeles River project?
A: Montebello, Pico Rivera, Downey, South Gate, Lynwood, Paramount, Compton, Bellflower, Lakewood, Carson, Long Beach, Gardena and parts of the city and county of Los Angeles.
Q: When will homeowners in those communities be required to purchase flood insurance?
A: Homeowners are strongly advised to get flood insurance before July 1, because the rates will be much higher after the new maps go into effect.
“After July 6, $100,000 of coverage in the [flood hazard area under restoration] could be $590 for a year. The same policy right now is about $281. That’s a savings of $309 every year until the restoration is done,” said Eliza Chan, public affairs officer in FEMA’s San Francisco office.
The lower rate will be locked in for as long as you maintain the policy, and you can transfer the low-rate policy to a new owner if you sell your home.
Q: Where can I get more information about flood insurance?
A: If your insurance agent can’t answer your questions, call the National Flood Insurance Program at (800) 427-4661 or visit the FEMA Web site: https://www.fema.gov.
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Marcie Geffner is a Los Angeles-based freelance writer. She can reached via e-mail at mgeff@worldnet.att.net.