Flood Insurance Still Underutilized, FEMA Warns

With the 2006 hurricane season predicted to hold the same destructive potential as the record 2005 season, the Federal Emergency Management Agency (FEMA) cites a RAND Corporation study finding millions of eligible homes in hurricane-prone areas still without flood insurance.

According to FEMA, administrators of the National Flood Insurance Program (NFIP), homeowners in Louisiana, one of the states devastated by Hurricane Katrina, pay an average premium of $477 for NFIP flood insurance. Under an NFIP policy, homes can be insured for up to $250,000 and contents up to $100,000. NFIP insurance provides payments in addition to those from homeowners’ standard policies covering losses caused by fire, wind and many other dangers.

In the aftermath of Hurricanes Katrina and Rita, victims without flood insurance ended up with settlements which fell far short of the costs of replacing their homes or businesses.

“If you try to make it without flood insurance, you could be looking at financial ruin,” said Diana Herrera, spokeswoman for NFIP in a press release. Noting the required 30-day waiting period before flood insurance coverage begins, Herrera urged home and business owners to act quickly. “The door is open and now is the time to step through it,” she said.

Since 1978, the federal flood insurance program has paid out over $11.6 billion in claims. Up to 25 percent of that went to owners of flood damaged property located outside of designated "flood prone" areas. Do you need flood insurance?

Also See: Myths and Facts About Flood Insurance