Why You Could Soon Be in a Flood Zone

Back in 2001 the Federal Emergency Management Agency (FEMA) launched an ambitious effort to bring its maps of the U.S. into the digital age. Many of the maps, meant to show flood-prone areas, hadn't been reviewed for 20 years or more, even as two trends intensified: a pattern of more severe storms nationwide and stepped-up real estate development that made water absorption more difficult in certain regions. Updated maps are starting to come online, with many more due to be approved over the next three years. By the time FEMA is finished, homeowners could find they are living in a new flood zone with financial risks they hadn't anticipated. Here are answers to key questions about the FEMA changes.

What does this mean for me?

If you live in an area deemed to be flood-prone and you have a federally backed mortgage, you may be required to buy flood insurance. In one spectacular example, maps in El Paso County, Tex., could designate as many as 7,000 additional homes as being in a high-risk zone because the Rio Grande levee system failed to meet government standards.

Your odds of ending up in a freshly designated flood zone are greater if you live in areas where FEMA is putting most of its resources, including such states as Louisiana, Ohio, and Florida.

How do I get flood insurance?

Basic homeowners' policies don't cover damage from floods caused by water entering a house from the outside. Your best option is to buy it from FEMA's National Flood Insurance Program, through an agent with a participating company that sells the policies. You can only buy an NFIP policy if you live in one of the 20,300 communities that participate in FEMA's flood program. Those localities have agreed to take steps to reduce flood risk and to enact emergency plans.

What does it cover?

Unfortunately, coverage is fairly limited. The most you can buy is $250,000 for building damage and $100,000 for the contents of your home. Flood insurance also won't cover such things as a finished basement or the living expenses you might have to pay while your house is being repaired. If you're in a high-risk area, you'll pay as much as $2,462 annually in premiums. Closer to the coast, premiums can be double that amount.

What if I want more extensive coverage?

You might be able to sign on with one of a handful of insurance companies offering other options. There are excess-coverage policies, which pay for damages above the NFIP's $250,000 limit, available from Chubb, Fireman's Fund Insurance, and others. In some cases you have to be an existing client to buy one.

Is the insurance worth it even if I don't live in a flood-prone area?

Flood damage is probably a lot more common than you think. Plus, the NFIP's rates are fairly inexpensive. For homes in low- to moderate-risk zones that haven't been flooded, there's a preferred-risk policy, with premiums of up to $317 annually.