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Flood Insurance
With the huge impact that hurricanes Katrina and Rita had on the national consciousness last fall, it is no wonder that the issue of flood insurance has seen a rise in terms of application. What most people do not realize is that flood insurance goes well beyond just areas that have the potential to be hit by a disastrous act of nature such as a hurricane; flood insurance is also a necessity to those who live along rivers, below hills, and those on flood plains. Flood insurance is also important even for those who do not live in areas that would typically come under threat of a rise in water levels; as the weather patterns change and weather becomes more severe, people are finding that sudden rainstorms or snowstorms can potentially be disastrous to property and goods. Keep in mind that even a few inches of water can cause a lot of damage, so flood insurance is important in the case that a water line breaks and floods your basement.
With the rise in importance of insurance, it is good for most people to know that some changes have come along in the way that this type of coverage is administered. It used to be that there were three levels of coverage. The issue that kept coming up under this method was that a disproportionate number of people made repeat claims; these were usually people who resided in flood prone areas, and their claims were made after each season. The result was that people in lower risk areas of the country were paying higher rates when compared to the practical application of their insurance. (In other words, the people who didn't use it as often were getting a bad deal).
The National Flood Insurance Program, which is the organization which provides the insurance backed by the federal government to flood victims, was already proceeding towards a more equitable solution to the problem well before the Katrina catastrophe, and the new standards came into effect as of October 1, 2005. These standards seek to lower the amount of money paid by the program by encouraging better building in terms of flood protection. For example, grants are to be made available to those in high risk flood areas that will assist in flood proofing risky homes and in demolishing structures that are prone to flooding. Owners who have repetitive flood claims can choose to decline the grant offers, but do so at some risk. If they will not mitigate, their insurance rates will be increased by 150%. In the event that their property is flooded and they must make a claim (exceeding $1500), the insurance premium will again increase by 150%.
The purpose of these rules is clearly a means of ensuring that the NFIP practices fair rules for all subscribers, and that those who do not own high risk properties are not punished by higher rates when repetitive claims are made by people who do. The NFIP website includes several tools for determining whether an individual lives in a high risk area and what exactly they can expect premiums in these areas to be.
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