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Are you at risk for damage from 'storm surge' flooding?

Think you don’t need flood insurance because you don’t live in a high-risk flood zone? A new report shows that not buying coverage can be a costly mistake for millions of coastal residents.

Millions of homes are at risk for damage from storm surge – ocean water pushed toward shore by strong winds from hurricanes and other storms – from Maine to Florida, according to the 2012 CoreLogic Storm Surge Report.

“It is important for homeowners to know and understand the risk to their homes,” says Tom Jeffrey, senior hazard scientist at CoreLogic, a company that provides information, analytics and services for insurance and other industries. “As we’ve seen in the (report), there are quite a few homes that are at risk from storm surge but that are not in FEMA flood zones. These homeowners might think they do not need flood insurance, but it is something they should consider if they are at risk from storm surge.”

Damage from storm surge: Are you at risk?

If you own a home, maybe you’ve checked to see whether you’re in an area designated by the Federal Emergency Management Agency as a high-risk flood zone and used that information to decide whether to buy flood insurance. Or if you have a mortgage, experts say, your bank has used those federal flood-zone maps to determine whether you’re required to carry flood insurance.

But there’s a problem with that approach, Jeffrey says.

“FEMA flood zones define areas at risk for fresh-water flooding, which is an entirely different hazard than hurricane-driven storm surge," Jeffrey says. "Extensive areas along both coasts are actually vulnerable to storm surge, yet not located within designated FEMA flood zones — and therefore homeowners are not required to carry flood insurance.”

FEMA flood-zone data does include storm surge, but the way the data are used to designate the flood zones, he says, has led to “vastly under-representing the number of properties that are at risk from all categories of hurricanes in many areas.”

In fact, cities all along the East Coast have tens of thousands or hundreds of thousands of single-family homes that are in storm-surge zones but not in FEMA flood zones, according to the CoreLogic report. Here are some of the numbers:

  • New York/Northern New Jersey/Long Island metro area has more than 315,000 such properties.
  • Boston metro area, almost 55,000.
  • Philadelphia metro area, almost 88,000.
  • Houston metro area, more than 138,000.
  • Miami metro area, more than 112,000.

“Know your risk. Just because you think you are not at risk does not mean there is no risk,” Jeffrey says.

He points out that the New York City area actually has the highest number of homes at risk of storm-surge flooding of any metro area in the report. And although the odds are lower for a hurricane to hit there than in Southeastern coastal cities, even a Category 1 storm – the least destructive type – could cause $48 billion in property damage in the New York City area, Jeffrey says.

“As we’ve seen over the past several years," he says, "the Northeast is not immune to hurricanes.”

In addition to consumers living in areas not traditionally thought of as hurricane zones, there’s another group who might mistakenly assume they’re not at risk: high-rise dwellers.

“People think that because they live on a high floor, they’re safe,” says Lynne McChristian, the Florida representative for the nonprofit Insurance Information Institute. “But you have to remember the power of water – it can take out the first floor and make it uninhabitable. What (people living on higher floors) fail to realize is that if water damages the bottom of the building and it’s condemned, then their loss is related to water, too.”

Getting insured for storm surge

The No. 1 thing homeowners need to know about water damage and insurance is that damage from flooding – including that caused by a storm surge – typically isn't covered by standard homeowner's insurance policies. Here are some tips on how to assess your risk and make sure you’re properly insured -- before you’re in the path of a hurricane:

1. Figure out your storm-surge risk. Experts recommend that you check with local emergency management officials to determine the risk of storm surge in your area. The National Hurricane Center has information regarding storm-surge risk and Ready.gov offers a list of state and local emergency management agencies.

2. Know how much damage storm surge can cause. “People underestimate the combination of the power of wind and water. That is something everyone needs to learn,” McChristian says. In Florida's Tampa Bay area, for example, officials have tried to make that clear by posting signs on 20-foot poles stating that storm surge can reach that level, she says.

3. Be aware that even a little water can cause costly damage. “If you just got 2 or 3 inches of water in your home, you would have to replace carpeting. If you had wood floors, those would have to go. You would have to replace electrical outlets,” McChristian says.

4. If you’re at risk for storm surge, shop for flood insurance. “I think everyone should consider buying flood insurance,” says Brian Deffenbaugh, senior counsel for the office of the Florida Insurance Consumer Advocate.

Flood insurance is available for dwellings for up to $250,000 and contents for up to $100,000.

Visit www.floodsmart.gov for more information on the National Flood Insurance Program, a federal program that underwrites flood insurance for property owners and renters. Homeowners who are in a storm-surge zone but not an area designated high-risk by FEMA can get much lower rates for flood insurance. “There are three different prices – low risk, medium risk and high risk,” Deffenbaugh says.

5. Remember that coverage for contents is not for replacement value. Instead, it’s actual cash value – the depreciated value of your possessions, McChristian says. But, she says, some insurance companies offer coverage to bridge the gap between actual cash value and replacement value.

6. Get enough coverage for your home. If you have a house that’s valued at more than the $250,000 limit ofdwelling coverage offered through the National Flood Insurance Program, then you should buy excess flood insurance through a private insurer. Several private companies sell coverage above NFIP's limits for homeowners who buy policies through the federal program. “You hear about people who buy that $250,000 flood insurance and they have a million-dollar home, and that’s not going to be enough,” McChristian says. “The excess flood coverage is really important.”

7. If you rent, make sure you’re covered. Renters also need flood insurance, but only for the contents, not the structure, McChristian says. “There are some renter’s insurance companies that also cover flooding, but many do not,” she says.

8. Don’t let your guard down. A study by the Wharton Risk Management and Decision Processes Center showed that the median length of time a consumer keeps a flood insurance policy is two to four years. “They see a flood, and it will get their attention and they take action,” McChristian says. “But memory fades, they think they’re safe and they drop the policy.”

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