Hurricane season is here. And the worst may be yet to come.

The season stretches through October -- and 77% of the storms strike after July, the National Hurricane Center says.

This year, the National Oceanic and Atmospheric Administration predicts 13 to 17 named Atlantic storms. Seven to 10 should become hurricanes. An average season sees 11 named storms.

And active storm seasons can be costly. "Total claims paid by the National Flood Insurance Program during the 2004 and 2005 hurricane seasons totaled nearly $18 billion," said David Maurstad, director of mitigation and federal insurance administrator for the program.

Katrina accounts for 87% of the total, which was $3 billion more than the NFIP paid after the program began in 1978.

You don't have to live in hurricane territory to be concerned. Floods occur in all 50 states. Texas and parts of the central and southern U.S. have already been socked by devastating floods in recent weeks.

A key problem is that most homeowner policies don't cover floods. They usually cover damage from falling rain. Floods are excluded.

A flood occurs when a nearby river or stream overflows. It's also when ground water from a storm seeps into your basement.

To get coverage, you can buy flood insurance. Basic coverage is available through NFIP, which is administered by the Federal Emergency Management Agency.

This program covers more than 5.4 million people.

"Most NFIP policies are sold by private insurance companies," said Maurstad. The agent who sold your homeowner's policy may handle NFIP coverage, too.

NFIP insurance can reimburse you for up to $250,000 of damage to your home. The limit for contents is $100,000. That's for homeowners and renters.

Business property owners can insure a building for as much as $500,000. They can get another $500,000 of coverage for contents.

Cost Vs. Coverage

The cost of an NFIP policy varies with the coverage. All insurers must charge the same.

You'll pay the highest premium if your home is in a high-risk flood zone. That's an area where the odds of a flood are at least 1% yearly.

In these areas, you may need flood insurance to get a mortgage.

You'll pay as much as $5,358 a year to get maximum NFIP coverage if you live in a high-risk coastal area. Go to floodsmart.gov to see if your home is in this category.

That price assumes you insure the house for $250,000 and contents for $100,000. It also assumes you take a $500 deductible. A higher deductible will lower your premium.

You can get the same $250,000 and $100,000 coverage with a $500 deductible for as little as $317 a year. That will be the case if you qualify as a preferred risk.

You must live in an area with low to moderate flood risk. And you can't have a history of generating sizable flood claims for that home.

From the time you buy an NFIP policy, it usually takes 30 days for coverage to take effect. So don't wait until a storm is on its way.

Start the process as soon as you determine you're interested in this coverage. And don't feel you must stop with NFIP insurance.

The cost to rebuild your home could top the NFIP's $250,000 ceiling. And your contents may be worth more than $100,000.

If needed, you can buy coverage beyond the NFIP limits from such companies as American International Group, Chubb and Fireman's Fund.

Some policies start where NFIP coverage ends. Other policies replace NFIP coverage. The latter provide the first dollar of damage compensation, then extend above the NFIP ceilings.

An insurer may require you to have a basic homeowner's policy from that insurer as well. Having one policy can help you avoid a debate with multiple insurers over which ones must pay for various damages.

For example, if you have homeowner's insurance with Fireman's Fund, you might be able to add $1 million of flood insurance for $555 per year. That rate applies to low and moderate risk areas.

At AIG, excess flood coverage may be available if you have homeowner's coverage through its Private Client Group. The company's Lexington Insurance subsidiary offers coverage even if you don't have its homeowner's policy.

Mansion Insurance

At either AIG insurer, prices are on a case-by-case basis, dependent on factors such as building age and construction method.

The same case-by-case approach is reported by Chubb, where coverage up to a total of $15 million is available, for home and contents. Flood insurance policies are available in some states and are being rolled out to others.

Chubb offers flood insurance that picks up where NFIP coverage leaves off.

Or you can buy a policy that pays first-to-last dollar, eliminating the need for NFIP insurance.

You'll pay more for a Chubb policy, in return for broader coverage.


 

-Donald Jay Korn