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Flood Insurance A Rarity In The Northeast

It is bad enough that Hurricane Sandy slammed into the northeastern United States earlier this week and caused record water damage, but many home and business owners are likely to receive a secondary shock in her aftermath, as they discover for the first time that standard homeowners insurance policies do not cover flood damage, and many of these same homeowners do not have flood insurance. The good news is that many of these same people may purchase flood insurance in the coming months, to be better prepared for next time.

At least that was the result last year after Hurricane Irene caused massive flooding across 13 eastern states. A survey found that flood coverage rose to 14 percent of homeowners from 5 percent before Irene struck.

“Nothing sells flood insurance like a flood,” says Robert Hartwig, the organization’s president. “There will be many people in parts of the Northeast this week who will be very happy that they spent a few hundred dollars to buy flood insurance this year.”

Almost all of the flood coverage purchased is done through the government’s National Flood Insurance Program, which allows homeowners, renters, and businesses in participating communities to buy federally backed policies. Information is available at floodsmart.gov.

Policies typically run around $600 per year, but may be lower in low risk areas. The average flood claim paid out last year was around $28000, and coverage is provided for up to $250,000 for the home and $100,000 for possessions.  The NFIP was created in 1968 because the cost of catastrophic flooding kept many insurers from writing flood policies.

Even though Irene sparked and increase in flood coverage, the majority of those affected by Sandy will still end up paying out of pocket, simply because they do not have coverage. It is also quite common for people in low risk areas to forego the idea of flood insurance coverage.  Irene should have served as a warning to folks in those areas, that no one is really immune from flooding.  Almost 20 percent of all flood insurance claims come from areas that are best described as moderate to low risk.

Whether water damage is covered by homeowners insurance depends on how it occurred. Some policies may cover structural and water damage in limited circumstances, such as a falling tree breaking a window and allowing rain to get inside. Damage is generally not covered as a result of rising water, which accounts for much of what Sandy triggered along the east coast.

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