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Wednesday, September 18, 2013

Floods Can Blindside the Uninsured, But Does It Need to Be This Way?

[Published Sept. 19 2013, in the Jeffco editions of the Denver Post's YourHub section and in five Jefferson County weekly newspapers]

Many homeowners and renters who suffered losses in the recent flooding have discovered that their homeowners or renters insurance did not cover them.  They may have already known as much -- but they also knew they weren’t in a flood zone, so why have flood insurance?

If you purchase a home in a flood zone (as determined by FEMA maps) and apply for a federally insured mortgage, you are forced to buy flood insurance. 

However, what if you buy a home that is not in a flood zone?  Your lender does not require you to buy flood insurance, but then the unthinkable happens.  The rule is that if water touches the ground before entering your house, the damage it causes is not covered by the standard homeowners insurance policy.  Only if water enters through the roof or a wall are you covered.  But I have a modest proposal.  I propose that if you are not in a flood zone, your homeowners or renters insurance should cover flooding if it is through no fault of the policyholder.  An example of homeowner-caused flooding would be if the homeowner left a hose running and it flooded the basement.

Such a change, I believe, would be fair, because it would be a rare situation that a home not in a flood zone would experience flooding.  Even with the recent losses in our northern counties, surely the major insurance companies could more easily absorb those claims — as they do with covered disasters such as wildfires — given how all losses are spread out over millions of policyholders.  I think most policyholders would be okay, if necessary, with paying a few dollars more per year to have fellow policyholders and themselves covered in such unforeseen disasters.

The insurance industry is unlikely to institute such a policy change by itself, so maybe it would have to be done through legislation. If so, I hope that some legislator will sponsor such legislation.

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