Flood Insurance Problems Which Have Surfaced From Hurricane Katrina
By Victor J. Lefeve

Everyone is well aware of the flooding problems caused by Hurricane Katrina, and since most of the devastation happened so close to the Baton Rouge area, it may be timely to alert every one of some of the issues, which are so important when purchasing flood insurance protection.

Flood insurance protection is not provided by your homeowners’ insurance policy, but must be purchased under a separate insurance policy through the government sponsored National Flood Insurance Plan.

Since flood insurance protection is provided under a separate policy, it is most important that you understand the limited coverage, which the policy provides, as compared to your broader homeowners insurance policy.

The maximum amount of flood protection available, under the National Flood Insurance Plan, to your home is currently $250,000. In order to receive the replacement cost of your damaged home you must purchase flood insurance in an amount equal to 80% of the replacement value of you home, or the currently available maximum insurance of $250,000. If your insurance coverage does not meet these requirements your claim will be adjusted on an actual cash value basis, which normally will reduce the recovery on your damaged property by the depreciation value of your property at the time of loss. Furthermore, if you have any detached buildings or other structures on your premises, the National Flood Insurance Program requires that you purchase a separate flood insurance policy if you desire flood insurance protection on these structures.

The National Flood Insurance Plan also provides flood insurance protection on the contents or personal property in your home, but the maximum protection available is $100,000, and it is always adjusted on an actual cash value basis.

As many in the New Orleans area have discovered, the insurance limits provided through the National Flood Insurance Plan have proven to be grossly inadequate when you have the type of catastrophe as Hurricane Katrina. There are, however, a limited number of insurance companies, which provide flood insurance protection in excess of the limits afforded under the National Flood Insurance Plan. The cost of this excess flood insurance protection is normally higher than the government sponsored National Flood Insurance Plan, and if your home and personal property are valued higher than what you can purchase through the National Flood Insurance Plan, the additional cost of this excess flood insurance may be warranted. Now is the time to evaluate your individual needs.

Flood insurance issues are very complicated, and it is recommended that you discuss your flood insurance concerns with your professional insurance agent to avoid the problems now being experienced by Hurricane Katrina flood victims.

Victor J. Lefeve, CPCU, CIC, CPIA is president of Employees Insurance Representatives, Inc. a local independent insurance agent in the Baton Rouge area.