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Is flood insurance worth the cost for homes outside flood plains?

This article originally appeared in the June 2011 issue of Milwaukee Magazine

Last July, heavy rains pummeled southeastern Wisconsin, turning streets into rivers and basements into backed-up swimming pools. Unfortunately for Fran Verito of Whitefish Bay, her home lacks a basement, so her first floor was hardest hit, with close to $30,000 in damages.

“It was pretty crazy,” she says. “Water came rushing through the doors, and I had about a foot of water throughout my main living area.” Still, Verito considers herself fortunate. “I was able to save some furniture and things. But a lot of stuff needed to be tossed.” She had installed new Pergo laminate flooring, which was also scrapped, along with all the doors and trim molding. Additionally, the furnace and plaster walls needed repairing.

All of this damage could have been covered by flood insurance – if only Verito had any. And she’s not alone. Homeowners who live outside special flood hazard areas aren’t mandated to buy this insurance, and most don’t.

That can be a big mistake, because supposedly flood-free areas often have problems. “Basically, any given year, nationwide, 20 to 25 percent of all flood insurance claims are for areas outside the special flood hazard area,” stresses Gary Heinrichs, flood plain planning program manager for the Wisconsin Department of Natural Resources.

If anything, the problem is growing worse. Climatology experts say global climate changes are making the weather more erratic, with more floods and droughts.

Heinrichs recommends researching the neighborhood you live in. “Talk to your building official and the engineering department of your community,” he says. “See if there’s been flooding in the past, how deep the floodwaters got, what kind of damages there were.” Once you have a clear understanding of your risk, you can make a better decision as to whether you should invest in flood insurance.

But before buying it, says Wisconsin Commissioner of Insurance Ted Nickel, you should first take a close look at what your homeowner policy covers. “It always makes sense for the consumer to contact their insurance carrier to understand the levels of coverage in their policies,” he says. “A standard homeowners policy does not cover flood damage, and that peril, if you will, is left up to the National Flood Insurance Program.”

This program was started in 1968 by the federal government, which provides the coverage and sets the rates, while local insurance agents handle selling and writing the policies. For homeowners, coverage of $20,000 to $250,000 is available for your building and $8,000 to $100,000 for its contents (your personal property).

For those who have previously experienced flooding of 6 inches to a foot on the first floor, Heinrichs advises them to at least consider personal property coverage. (Buyers can choose to cover just the building, just its contents or both.)

“The rates for people outside the mapped flood hazard area are very attractive,” says Heinrichs. “They’re about half or less what people in a flood plain would pay.” An average flood insurance policy, according to the NFIP’s floodsmart.gov website, costs less than $570 a year.

“Any community that participates in a National Flood Insurance Program can buy flood insurance,” Heinrichs says. “It doesn’t matter whether you’re in a flood plain or not.” Every community in Milwaukee County and most in Waukesha and Ozaukee counties participate in the NFIP, says Heinrichs. Across the state, he adds, “roughly three-quarters of all cities, villages and counties participate.”

One misconception is that flood insurance doesn’t cover sewer backups. While it doesn’t cover those unrelated to flooding, it does include sewer backups directly caused by a flood, according to NFIP guidelines. “[In] 2010, clearly the predominant cause of flood damages was storm sewer overflows,” says Heinrichs. “Look at Shorewood and Whitefish Bay, for instance. None of those areas were in a flood plain. That was mostly stormwater flooding.” And any affected homeowner who had an NFIP policy would have been eligible for coverage.

Not everyone is a candidate for flood insurance. It depends on where you live. And, adds Nickel, “it’s about your tolerance for risk.”

Verito, though, seems to have decided. “I’m probably going to get it,” she says. “I just haven’t taken the plunge, if you will.”

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