Savvy Consumer: Finding Flood Insurance

June 30, 2006 — -- I came home the other night to my Washington, D.C., house and discovered that the record rains we'd been having had penetrated my basement.

To make matters worse, I'm pregnant, I had zero energy, and my husband was out of town on business!

Plus, I had to leave town for a funeral. Argh!

The one good thing that came out of all this was that it gave me an excuse to share some important cautions with you about homeowner's insurance.

It's quite possible that I'm going to have to replace the carpeting in my basement. But will I be filing a homeowner's insurance claim to pay for it? No.

First of all, flooding is not covered by a standard homeowner's policy. The general rule of thumb is that water damage that comes from the sky down is covered. Water damage that comes from the ground up is not.

Most homeowner's policies cover floods caused by burst pipes. If rain had fallen into my house, I'd be covered. Because the water had saturated the soil and then seeped in below ground, that was considered flooding.

If you live in a flood-prone area, you should definitely get flood insurance. In fact, your mortgage company may require it.

You can purchase flood coverage through your insurance agent, but it's actually provided by the federal government. Flood coverage takes 30 days to kick in, so don't procrastinate until your TV weatherman announces a flood warning.

Guess what? Even if my existing policy had covered my damaged basement, I still wouldn't have made a claim!

If you make too many claims, your insurance company won't renew your homeowner's policy. Times are tight for insurance companies, and they're balancing their budgets by getting tougher with their customers.

Some states prohibit insurance companies from dropping you for weather-related claims. If you make claims for things like stolen bicycles or if you make two or three claims within just a few years, you could find yourself without insurance.

What's worse, insurance companies report information about you to a central agency, so you may have trouble finding another company to insure your house.

Even if you call your insurance company to make a claim and then decide not to, that telephone inquiry is sometimes reported to the central agency and could count against you.

The best advice? Save your insurance for true catastrophes. That's what it's for. Don't make small claims. If you call your company to inquire about making a claim, don't give your name. Tell the insurance company you're just doing research.