Hurricane Sandy the Frankenstorm Is Coming: Do You Have Flood Insurance?

Hurricane floodingWith Hurricane Sandy poised to hit U.S. shores early next week, people all along the East Coast are remembering Irene, Katrina, Ike and Hugo. But this one could be even worse.

The storm has already killed at least 21 people in the Caribbean, and forecasters are warning that it could turn deadlier if, as expected, it merges with a cold front -- a possibility that's already been dubbed "Frankenstorm."

That's why we've dug out some advice about flood insurance that DailyFinance reporter Sheryl Nance-Nash compiled last year when Hurricane Irene came calling. Considering that four out of every five natural disasters nationwide involve flooding, while less than a fifth of U.S. homeowners have a flood insurance policy, it's advice too many of us still need.

"People tend to underestimate the risk of flooding," said Jeanne M. Salvatore, senior vice president and consumer spokesperson for the Insurance Information Institute, in a prepared statement. "But, in fact, 90% of all natural disasters in this country involve flooding. It is important to note that there is a 30-day waiting period for flood insurance to go into effect, so don't delay purchasing this important financial protection."

A miscalculation can be costly. The average annual U.S. flood losses in the past 10 years were more than $2.7 billion, according to data from the National Flood Insurance Program.

Maybe you're thinking you're covered by your standard homeowner's policy -- you're not. Or, maybe you think flood insurance is outrageously expensive -- also untrue. According to the Insurance Information Institute, the average flood insurance policy in 2010 was $594 a year for $220,577 worth of coverage, while the average amount of a flood insurance claim was $26,067. You can find out your risk of being affected by a flood and the cost of a policy at

The 11 Costliest Hurricanes in U.S. History
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Hurricane Sandy the Frankenstorm Is Coming: Do You Have Flood Insurance?

The devastation wrought by Hurricane Sandy is a good reminder that the strength of a storm is less important than where it makes landfall. Despite its enormous size, it was classified as only a Category 2 storm at its peak, and by the time it made landfall in the Northeast, it had been reclassified as a "post-tropical storm" (a designation that will force insurers to pay more in claims than they would have for a storm classified as a hurricane).

Hurricane or not, though, Sandy's landfall near New York City and other major population centers in the region immediately vaulted it onto the list of the most expensive storms in the nation's history. While the first wave of cleanup and recovery continues throughout the region, there's little doubt that the massive flooding and wind damage associated with Sandy will ultimately cost tens of billions of dollars, to say nothing of the human toll.

Click through our gallery to find out how Sandy stacks up to other devastating Atlantic storms.

* - Costs adjusted to 2010 dollars on basis of U.S. Dept. of Commerce Implicit Price Deflator for Construction. The storms from 2011 and later are not adjusted. The National Climatic Data Center (NCDC) rates Hurricane Katrina's damage at $133.8 billion 2007 dollars.

Landfall Category: 1

U.S. Damage: 11.7 Billion

Date of storm: June 18-23, 1972

U.S. areas affected: Florida(Panhandle), Georgia, Carolinas, Northeastern U.S.

This June 23, 1972, photo shows people in  Harrisburg, Pa., being rescued by boat from their homes after Hurricane Agnes caused the Susquehanna River to overflow its banks, leading to heavy flooding.

Source: Weather Underground

Landfall Category: 4

U.S. Damage: $9.7 billion

Date of storm: Sept. 17-22, 1989

U.S. areas affected: Georgia, North Carolina, Puerto Rico, South Carolina, Virginia, U.S. Virgin Islands

A South Carolina man displays a photograph of his house taken before Hurricane Hugo destroyed it in September 1989.

Source: Weather Underground

Landfall Category: 3

U.S. Damage: $11.8 billion

Date of storm: Sept. 20-26, 2004

U.S. areas affected: Alabama, Arkansas, Florida, Louisiana, Mississippi, Tennessee, Texas

Rosa Machado (center) of Lafite, La., walks through waist-deep flood water as a neighbor's trailer burns following Hurricane Rita's late September passage through the area.

Source: Weather Underground

Landfall Category: 1

U.S. Damage: $15.8 Billion

Date of storm: Aug. 26-28, 2011

U.S. areas affected: Connecticut, Delaware, Massachusetts, Maine, Maryland, North Carolina, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, Virginia, Vermont, Washington DC

Hurricane Irene crippled 10 states during its slow climb up the Eastern Seaboard, causing massive flooding and power outages. The brutal storm made landfall in North Carolina and traveled to Maine.

Billy Stinson (C), his wife Sandra Stinson and daughter Erin Stinson (R) comfort each other as they sit on the steps where their cottage once stood before it was destroyed by Hurricane Irene on Aug. 28, 2011 in Nags Head, N.C.

The cottage, built in 1903 was one of the first vacation cottages built on Roanoke Sound in Nags Head. Stinson had owned the home, which is listed in the National Register of Historic Places, since 1963. "We were pretending, just for a moment, that the cottage was still behind us and we were just sitting there watching the sunset," said Erin afterward.

Source: Weather Underground

Landfall Category: 4

U.S. Damage: $15.8 Billion

Date of storm: Aug. 13-14, 2004

U.S. areas affected: Florida, North Carolina, South Carolina

At least 13 people were killed when Hurricane Charley left a path of destruction across Florida then continued north and struck the Carolinas.

Pictured: Debris from homes destroyed by Hurricane Charley litters the waterways that surround much of Punta Gorda, Fla.

Source: Weather Underground

Landfall Category: 3

U.S. Damage: $19.8 Billion

Date of storm: Sept. 15-21, 2004

U.S. areas affected: Alabama, Delaware, Florida, Georgia, Louisiana, Maryland, Mississippi, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia

Residents of Pensacola Beach, Fla., pass by an SUV half buried in sand as they walk back to their homes on Sept. 22, 2004, to inspect the damage caused by Hurricane Ivan.

Source: Weather Underground

Landfall Category: 3

U.S. Damage: $20.6 Billion

Date of storm: Oct. 24, 2005

U.S. areas affected: Florida

After striking Mexico from the Caribbean Sea, Wilma turned northeast, strengthened over the Gulf or Mexico, and made landfall near Cape Romano, Fla., on Oct. 24 as a Category 3 hurricane. The eye crossed the Florida Peninsula in less than five hours, and it moved into the Atlantic just north of Palm Beach as a still forceful Category 2 hurricane.

Pictured: A public phone is surrounded by flood waters near a block of hotels as Hurricane Wilma lashes Cancun, Mexico, on Oct. 21, 2005.

Source: Weather Underground

Landfall Category: 2

U.S. Damage: $27.8 Billion

Date of storm: Sept. 12-14, 2008

U.S. areas affected: Arkansas, Illiniois, Indiana, Kentucky, Louisiana, Missouri, Ohio, Pennsylvania, Texas

Flood waters from Hurricane Ike were reportedly as high as eight feet in some areas, causing widespread damage across the coast of Texas in September 2008.

Pictured: A home in Gilchrist, Texas, is left standing among debris left by Hurricane Ike.

Source: Weather Underground

Landfall Category: 5

U.S. Damage: $45.5 Billion

Date of storm: Aug. 24-26, 1992

U.S. areas affected: Florida, Louisiana

Andrew came ashore in Florida near high tide, pushing a 16.9 foot storm tide (the sum of the storm surge and astronomical tide) into Biscayne Bay, a record for the southeast Florida peninsula.

Source: Weather Underground

Landfall Category: Post-Tropical Storm

U.S. Damage: Early estimates indicate damage and economic losses as high as $50 billion

Date of Storm: October 29-31, 2012

U.S. Areas Affected:  Connecticut, D.C., Delaware, Florida, Maine, Maryland, Massachusetts, New Hampshire, New York, New Jersey, North Carolina, Ohio, Pennsylvania, Rhode Island, West Virginia, Vermont, and Virginia.

Pictured: NEW YORK, NY - OCTOBER 29:  Rising water, caused by Hurricane Sandy,  rushes into a subterranian parking garage on October 29, 2012, in the Financial District of New York, United States. Hurricane Sandy, which threatens 50 million people in the eastern third of the U.S., is expected to bring days of rain, high winds and possibly heavy snow. New York Governor Andrew Cuomo announced the closure of all New York City will bus, subway and commuter rail service as of Sunday evening.

Landfall Category: 3

U.S. Damage: $105.8 Billion

Date of storm: Aug. 25-30, 2005

U.S. areas affected: Alabama, Florida, Georgia, Louisiana, Mississippi, Tennessee

Katrina unleashed torrential rains and a potent storm surge that led to disastrous flooding that left about 1,600 people dead, destroyed  thousands of homes and marred the presidency of George W. Bush, whose administration was severely criticized for its handling of the crisis.

Pictured: President Bush (center) tours the devastation in New Orleans with Mayor Ray Nagin (right), Louisiana Gov. Kathleen Blanco and Vice Adm. Thad Allen.

Source: Weather Underground


Why You Need Insurance

The No. 1 misconception when it comes to flood risk is that some people are in a "flood zone" while others are not, points out Janet Scott-Buckley, manager of Harrington Insurance Agency. "Everyone is in a flood zone. Even lower-risk areas can experience a flood. The question is: Are you in a SFHA (Special Flood Hazard Area) or not, and does your community participate in the National Flood Program?"

Low risk is not the same as no risk. "Even those who do not live in an area at high risk for flooding should talk to their agent or company representative about getting flood insurance," Salvatore said in a prepared statement. "Since the inception of the NFIP, 25 to 30% of the NFIP's paid losses were for damage in areas not officially designated as special flood hazard area at the time of the loss."

Flood insurance isn't exotic: It covers the direct physical losses resulting from heavy or prolonged rain, melting snow, blocked storm drainage systems and levee dam failure, and they company that issued your renters or homeowner's policy likely also provides it. You can also get coverage from the NFIP.

Worth the Money?

"Aside from obvious flood threats (i.e. flood zone, coast, etc.), there is no hard and fast rule to guide a decision on whether to purchase flood insurance. Each property owner needs to assess their risk based on a variety of factors, including topography, proximity to a flood zone or coastal area, personal financial situations, mortgage lending requirements, etc. My advice: When in doubt, get the coverage. While federal flood coverage is limited to $250,000 and may not fully cover an entire loss, it is better to have some protection than none at all," says Alex Winslow, executive director of Texas Watch, a nonpartisan citizen advocacy group.

Sandra Knight, deputy federal insurance and mitigation administrator, recognizes that for many of us, money is especially tight these days. "We know that for homeowners -- especially in this economy -- any additional expenses can be difficult, and may seem unnecessary if they have been lucky enough not to experience a flood," she wrote in a blog last year. "But, like insurance we purchase for our cars, or our health -- flood insurance is meant to protect us from the much greater costs we could incur if a flood did hit. We hope homeowners that do purchase flood insurance never have to use it, but it is a critical means of protecting your property and loved ones against a hazard that hits far too many communities around the country each year. The consequences can be personally and financially devastating."

Robin Westcott, Insurance Consumer Advocate for the state of Florida, concurs. "Because flood insurance is generally relatively inexpensive, for most people it is affordable, so I encourage people to look at getting the coverage," Westcott says. "You may need it, you may not, but because it's affordable, you can err on the side of caution."

Learn the Lingo

When dealing with flood insurance, understand that an insurer's definition of certain words is not the Webster's definition, warns Mark Carrasquillo, personal insurance agent with E.G. Bowman Company.

"It's the insurance version that will determine coverage. Many consumers, when discussing or describing a loss think that the words flood and water damage are interchangeable and by all rights, mean the same thing. Wrong!" says Carrasquillo.

"In the insurance world, they are different. Same damage result perhaps -- nevertheless, they are different because of how the damage was caused," he explains.

Flood, by definition (give or take a few words) is described as "the sudden rising or overflowing of surface water (inland or tidal waters) tides, tidal waves, spray" explains Carrasquillo.

In a nutshell, water damage is everything else -- the result of the breaking or cracking of any part of an appliance or system that contains water: The water heater, a baseboard or steam heat system, shower pan, toilet, etc. Also, water backup from sewers and drains. However, he says, water damage coverage must be added through a special endorsement: It's generally excluded from the standard homeowners policy.

Know too, that in insurance-land, the definition of a basement may not be what you think. For insurance purposes, a basement is any space below ground on all four sides, "If you have to step down into your house, even if it's only four inches," says Carrasquillo, that counts as a basement.

He says his "basement" is accessible through both a front door and a rear door. It has been finished as a den/family room. However, he must step down in order to enter the house -- therefore, that area counts as a basement. "My furniture, built-in bar, clothes closet, etc., are not covered in the event of a flood," says Carrasquillo. "If your basement is finished, the contents are not covered, even if you have contents coverage."

However, if you are able to walk out of the "basement" onto level ground without taking a step up, it is not considered a basement, says Carrasquillo.

Many people purchase flood insurance thinking that it will cover their finished basement and its contents -- carpets, TVs, furniture, etc. -- if they get water in their basement, says Scott-Buckley. However, to have the policy respond at all, the event must qualify as a flood-loss based on very specific guidelines, and there are many limitations on what is and is not covered in a basement (most of those "finished basement" items mention above are not).

"If you are one of the people who tends to get "water in the basement," there are some options," says Scott-Buckley. "If you have a sump pump, you can usually buy an endorsement on the homeowners policy that protects against loss due to sump pump failure/overflow."

What will happen, will happen, but being prepared can make a difference. So while you're stocking up on bottled water, food and what you need to batten down the hatches in case Mother Nature pays you a visit, don't forget flood insurance.

More on storm preparedness:
How to Protect Your Home From Damage in a 'Perfect Storm'
How to Avoid Home Repair Rip-Offs After Frankenstorm Passes

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