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Posted: 6:00 a.m. Wednesday, Oct. 23, 2013

Why you need to have flood insurance

By Clark Howard

ClarkHoward.com


There's a renewed focus on flood insurance after Congress removed the subsidies and sent premiums through the roof in some cases.

Too often, homeowners think their regular insurance policy will cover them in the event of a flood. They are stunned when they find out it doesn't. That's what happened to a lot of people in the Northeast during Hurricane Sandy. They were wiped out completely. And those who did have federal flood insurance, available through FloodSmart.gov, filed so many claims that the program became busted.

Historically, federal flood insurance premiums were as low as $100 to $400 annually, and the policy covered damage for up to $250,000.  Now when you see those policy renewals, the premiums could be increasing by tenfold because the federal subsidy is gone. In one example I saw cited, somebody in St. Petersburg, Fla., had his premiums go from $800 to $8,500!

Florida, as you might expect, has the most participants in the federal flood insurance program of any state. It is a real bind. If you are in a home where you had a subsidized policy, your next premium increase could be nasty -- unless Congress does something. But the level of dysfunction in D.C. right now doesn't bode well for that scenario.

For a buyer, if you're looking at a home in flood plain, make sure you properly budget for the more expensive policy. Many times the deal you can get will more than make up the cost of the policy. But go in with your eyes open and know what it will cost.

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