Flood insurance denotes the specific insurance Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of a contingent loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for a premium, and can be thought of as a guaranteed small loss to prevent a large, possibly devastating loss. An coverage against property loss from flooding A flood is an overflow or accumulation of an expanse of water that submerges land. In the sense of "flowing water", the word may also be applied to the inflow of the tide. Flooding may result from the volume of water within a body of water, such as a river or lake, which overflows or breaks levies, with the result that some of the water. To determine risk factors for specific properties, insurers will often refer to topographical maps that denote lowlands In physical geography, a lowland is any broad expanse of land with a general low level. The term is thus applied to the landward portion of the upward slope from oceanic depths to continental highlands, to a region of depression in the interior of a mountainous region, to a plain of denudation, or to any region in contrast to a highland. The and floodplains A floodplain, or flood plain, is flat or nearly flat land adjacent to a stream or river that experiences occasional or periodic flooding. It includes the floodway, which consists of the stream channel and adjacent areas that carry flood flows, and the flood fringe, which are areas covered by the flood, but which do not experience a strong current that are susceptible to flooding.
Hidden Floods
Nationwide, only 20% of American homes at risk for floods are covered by flood insurance. Private insurers are unable to insure against the peril of flood due to the prevalence of adverse selection Adverse selection, anti-selection, or negative selection is a term used in economics, insurance, statistics, and risk management. It refers to a market process in which "bad" results occur when buyers and sellers have asymmetric information : the "bad" products or customers are more likely to be selected. A bank that sets one, which is the purchase of insurance by persons most affected by the specific peril of flood. In traditional insurance, insurers use the economic law of large numbers to charge a relatively small fee to large numbers of people in order to pay the claims of the small numbers of claimants who have suffered a loss. Unfortunately, in flood insurance, the numbers of claimants is larger than the available number of persons interested in protecting their property from the peril, which means that insurers are unable to cover their costs in flood insurance.
In certain flood-prone areas, the Federal Government requires flood insurance to secure mortgage loans backed by federal agencies such as the FHA and VA. However, the program has never worked as insurance, because of adverse selection. It has never priced people out of living in very risky areas by charging an appropriate premium, instead, too few places are included in the must-insure category, and premiums are artificially low." [1] The lack of flood insurance can be detrimental to many homeowners who may discover only after the damage has been done that their standard insurance policies do not cover flooding.
Flooding is defined by the National Flood Insurance Program as a general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or two or more properties (at least one of which is your property from: Overflow of inland waters, unusual and rapid accumulation or runoff of surface waters from ANY SOURCE, and mudflows. [2]
This can be brought on by landslides, a hurricane A tropical cyclone is a storm system characterized by a large low-pressure center and numerous thunderstorms that produce strong winds and heavy rain. Tropical cyclones feed on heat released when moist air rises, resulting in condensation of water vapor contained in the moist air. They are fueled by a different heat mechanism than other cyclonic, earthquakes, or other natural disasters that influence flooding, but while a homeowner may, for example, have earthquake coverage, that coverage may not cover floods as a result of earthquakes.
In the United States
Many insurers in the US do not provide flood insurance in accordance to the risk factors established in some portions of the country. In response to this, the federal government created the controversial National Flood Insurance Program The National Flood Insurance Program was created by the Congress of the United States in 1968 through the National Flood Insurance Act of 1968 (P.L. 90-448) which serves as the insurer of last resort.
The National Association of Insurance Commissioners (NAIC) found that 33 percent of U.S. heads of household still hold the false belief that flood damage is covered by a standard homeowners policy. FEMA states approximately 50% of low flood zone risk borrowers think they are ineligible and CAN NOT buy flood insurance. Anyone can buy flood insurance as long as their community participates in the NFIP, even renters.
If you are eligible, you must purchase a separate flood insurance policy through an insurance company that participates in the National Flood Insurance Program (NFIP). Flood insurance is available for residents of approximately 19,000 communities nationwide.
In the United Kingdom
Usually, the British insurers require from clients living in Flood Risk Areas to flood-proof their homes or face much higher premiums and excesses.[3]
References
- ^ Floods, Tornadoes, Hurricanes, Wildfires, Earthquakes... Why We Don't Prepare. By Amanda Ripley. Time. August 28, 2006.
- ^ http://www.fema.gov/pdf/nfip/manual200805/15pol.pdf
- ^ http://www.edie.net/news/news_story.asp?id=13027&channel=0
| Insurance Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of a contingent loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for a premium, and can be thought of as a guaranteed small loss to prevent a large, possibly devastating loss. An |
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Health Health insurance is insurance that pays for medical expenses. It is sometimes used more broadly to include insurance covering disability or long-term nursing or custodial care needs. It may be provided through a government-sponsored social insurance program, or from private insurance companies. It may be purchased on a group basis or purchased by
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Accidental death and dismemberment insurance In insurance, Accidental death and dismemberment ) is a term used to describe a policy that pays additional benefits to the beneficiary if the cause of death is due to a non-work-related accident. Fractional amounts of the policy will be paid out if the covered employee loses a bodily appendage or sight because of an accident. In the event of · Dental insurance The most common types of dental insurance plans are Preferred provider organizations or dental health maintenance organizations (DHMO). Both types are considered managed care.[citation needed] · Disability insurance Disability insurance, often called disability income insurance, is a form of insurance that insures the beneficiary's earned income against the risk that disability will make working impossible. It includes paid sick leave, short-term disability benefits, and long-term disability benefits · Total permanent disability insurance · Income protection insurance · Long term care insurance Long-term care insurance , an insurance product sold in the United States and United Kingdom, helps provide for the cost of long-term care beyond a predetermined period. Long-term care insurance covers care generally not covered by health insurance, Medicare, or Medicaid · Vision insurance Vision insurance is a form of insurance that provides coverage for the services rendered by eye care professionals such as ophthalmologists and optometrists. There are many vision insurance companies. The typical vision insurance plan provides yearly coverage for eye examinations and partial or full coverage eyeglasses, sunglasses, and contact
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Life Life insurance or life assurance is a contract between the policy owner and the insurer, where the insurer agrees to pay a sum of money upon the occurrence of the insured individual's or individuals' death or other event, such as terminal illness or critical illness. In return, the policy owner agrees to pay a stipulated amount called a premium at
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Permanent life insurance · Term life insurance · Universal life insurance · Variable universal life insurance Variable Universal Life Insurance is a type of life insurance that builds a cash value. In a VUL, the cash value can be invested in a wide variety of separate accounts, similar to mutual funds, and the choice of which of the available separate accounts to use is entirely up to the contract owner. The 'variable' component in the name refers to this · Whole life insurance
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Business
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Bond insurance Bond insurance is a service whereby issuers of a bond can pay a premium to a third party, who will provide interest and capital repayments as specified in the bond in the event of the failure of the issuer to do so. The effect of this is to raise the rating of the bond to the rating of the insurer; accordingly, a bond insurer's credit rating must · Errors and omissions insurance · Fidelity bond While called bonds, these obligations to protect an employer from employee-dishonesty losses are really insurance policies. These insurance policies protect from losses of company monies, securities, and other property from employees who have a manifest intent to cause the company loss. There are also many other forms of crime-insurance policies · Professional indemnity insurance A typical PI policy will provide indemnity to the insured against loss arising from any claim or claims for breach of duty which may be made and reported to the insurers during the policy period by reason of any neglect, error or omissions committed in the conduct of the insureds professional business · Professional liability insurance Professional liability insurance, also called Professional Indemnity Insurance, protects professional practitioners such as architects, home inspectors, lawyers, physicians, and accountants against potential negligence claims made by their patients/clients. Professional liability insurance may take on different names depending on the profession · Protection and indemnity insurance
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Contents insurance · Earthquake insurance · Flood insurance · Home insurance · Landlords insurance · Mortgage insurance Mortgage insurance is an insurance policy which compensates lenders or investors for losses due to the default of a mortgage loan. Mortgage insurance can be either public or private depending upon the insurer. The policy is also known as a mortgage indemnity guarantee , particularly in the UK · Property insurance
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Other
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Insurance policy In insurance, the insurance policy is a contract between the insurer and the insured, known as the policyholder, which determines the claims which the insurer is legally required to pay. In exchange for payment, known as the premium, the insurer pays for damages to the insured which are caused by covered perils under the policy language. Insurance · Insurance law Insurance law is the name given to practices of law surrounding insurance, including insurance policies and claims. It can be broadly broken into two categories - regulation of the business of insurance and regulation of claim handling · Health Insurance Portability and Accountability Act The Health Insurance Portability and Accountability Act was enacted by the U.S. Congress in 1996. According to the Centers for Medicare and Medicaid Services (CMS) website, Title I of HIPAA protects health insurance coverage for workers and their families when they change or lose their jobs. Title II of HIPAA, known as the Administrative
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