Flood And Earthquake Insurance

When your home is flooded, it can lead to financial ruin if you don't have the proper insurance. And, in all likelihood, you don't have the proper insurance. A basic homeowners policy won't cover your flood damage! You need specific flood insurance. In most cases, you can only get this as a special policy backed by the federal government, with cooperation from local communities and private insurance companies who actually write the policies.

About 100 insurance companies, possibly including the company that already handles your homeowners or auto insurance, write and service flood insurance policies for the government, which finances the flood insurance program through premiums. The government agency responsible for this is the National Flood Insurance Program (NFIP), which is under the administration of the Federal Emergency Management Agency (FEMA). FEMAs website is www.fema.gov, for more information on this agencys overall mandate.

Although flood insurance is relatively inexpensive (given the cost to the insurer), most Americans tend to avoid purchasing protection. Only about one-quarter of the homes in areas most vulnerable are insured against flood loss, according to the Federal Insurance Administration (FIA). In vulnerable areas, flooding is 26 times more likely to occur than a fire during the course of a typical 30-year mortgage. It's critical to have insurance.

If you live in a flood-prone area, you need to be sure to contact NFIP in order to find out which insurance companies are providing flood insurance in your area. Keep in mind that many insurance policies will not pay benefit's until 30-days after the policy is in force. So don't wait until just before hurricane season to purchase! You should carry this insurance year round, to reduce your risk of an uncovered loss.

Another natural disaster common in the US is earthquake. Again, your basic homeowners insurance will NOT cover you for earthquake damage. You have to carry specialized coverage.

Since the beginning of the 20th Century, earthquakes have occurred in 39 states. Approximately 90 percent of Americans live in areas considered seismically active. Even so, only a small percentage of people purchase earthquake insurance. Even in California, where earthquake fears are a daily fact of life, less than 15 percent of homeowners have earthquake insurance according to the California Earthquake Authority (CEA), down from 30 percent in 1996 when the state legislature created the California Earthquake Authority. Each year, more homeowners get rid of earthquake coverage than buy it because, according to consumer groups, the policies cost too much and cover too little. Who buys earthquake insurance?

According to the U.S. Geological Survey, there is a 70 percent probability that one or more damaging earthquakes of magnitude 6.7 or larger will strike the San Francisco Bay area during the next 30 years. A magnitude 6.7 earthquake is equivalent to the 1994 Northridge earthquake that killed 57 people and caused $20 billion worth of damage.

Not surprisingly, Californians buy the most earthquake insurance. However, earthquake insurance has been sold to residents of all 50 states. After all, earthquakes have been known to occur even in the central regions of the continent.

The Earthquake Education Center at Charleston Southern University claims theres a 40 to 60 percent chance of a major earthquake somewhere in the eastern United States in the next 20 years. Less than 10 years ago, there was an earthquake with an epicenter just below the Great Lakes. Shocks from that earthquake were felt as far north as Toronto, Canada.

It is with this in mind that South Carolina Insurance News Service recommends residents of that state consider purchasing earthquake policies. Given the fact that there has been no appreciable earthquake activity in that state for many years, coverage is relatively inexpensive. And, adding it to a home insurance policy provides the right coverage, just in case.

Interestingly enough, the New Madrid Fault, which runs through Arkansas, Kentucky, Missouri and Tennessee, also has insurers worried. According to the Insurance Information Institute, there's a 40 % to 63% chance the region will suffer an earthquake with a 6.0 magnitude in the next 15 years. This is definitely something to think about, as scientists cannot yet pinpoint the timing of an earthquake. It could be tomorrow; it could be in 25 years.

If you are thinking about adding earthquake insurance to your policy, you may be able to get the right coverage from a private home insurance company. In California, you can also check with the California Earthquake Authority. Their website is www.earthquakeauthority.com.

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