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Flood Insurance
Flood insurance is important because most property insurance
policies don't cover flood damage. Standard Texas homeowners,
renters, dwelling and condominium policies all exclude flood
losses. So do most commercial property policies. Owners of
commercial buildings should check with their agents to determine
whether their policies cover floods.
Congress created the National Flood Insurance Program (NFIP)
in 1968 to fill the coverage gap contained in most property
policies. Flood policies are available in 19,000 communities
nationwide including 1,000 in Texas that meet federal standards
for minimizing property losses in flood-prone areas.
Texas is near the top nationally in flood losses. Flood
insurance claims paid to Texans totaled $1.4 billion in the
period 1978, second only to Louisiana. Our 122,554 individual
flood claims during that period ranked behind only Louisiana
and Florida.
Some people think a home or business is safe if it's
not near a creek, river, lake or low-lying area. They might
be mistaken. The NFIP says that one of every three claims
comes from outside high-risk flood areas. An overflowing
ditch or rainfall that overwhelms the drainage around your
house can send rising waters into your living room.
It's important to think ahead and buy flood insurance
before you need it. With few exceptions, a flood policy takes
effect 30 days after you buy it.
A flood policy covers both the insured building and its
contents. The policy also pays up to $500 for moving insured
contents to a safe location and up to $750 for expenses such
as pumps and sandbags to protect a building.
Even though flood insurance is a federal program, you can
buy flood insurance from the same local agent who writes
your home or auto policy.
Some people mistakenly assume they don't need flood
insurance because they can get federal grants to rebuild
after a flood. However, nearly all federal aid for such disasters
comes in the form of Small Business Administration (SBA)
loans, which must be repaid with interest. In addition, most
federal disaster assistance is available only if the president
declares your community to be a major disaster area.
Flood insurance is cheap compared with paying out of your
own pocket or taking out an SBA loan.
The price of flood insurance depends on where you live and
the amount of coverage needed. The average annual premium
in 2000 was $353. That's a bargain compared with payments
averaging $3,732 per year for a $50,000 SBA loan. If you
live in an area with low to moderate risk of flooding, you
might be able to buy an NFIP "preferred risk policy" for
as little as $106 per year.
Be sure to buy enough coverage. You can insure your home
for as much as $250,000 and your personal property for as
much as $100,000. Commercial buildings can be insured for
as much as $500,000, with another $500,000 for contents.
If your home is insured for at least 80 percent of its value,
you will have replacement cost coverage on the structure.
This means the policy will pay for repairs with no deduction
for depreciation. Contents coverage, however, is on an actual
cash value that is, not on a depreciated basis.
The preceding information provided by the Texas Department
of Insurance.
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