Reading many Katrina-related cases and the onset of National Flood Safety Awareness Week this week forces me to ponder the purchase of flood insurance.  Every article and relevant website on the subject advocates the purchase of flood insurance. Still, our Honolulu home is on high ground, a mile and a half from the coast, in an unlikely area for flash flood, and survived the heavy rains during the spring of 2006 without incident.

     I recently contacted my broker for a quote on flood insurance.  I was surprised the premium for maximum coverage was three times the premium we pay for homeowner’s insurance.  Further, maximum coverage for residential property is only $250,000 for structure, and $100,000 for contents, which may work in Kansas, but does not go very far in Hawaii.  Additionally, once you purchase the insurance, it is not effective for thirty days, preventing the purchase of coverage during the onset of a major storm.

     A useful source for understanding flood insurance is at Floodsmart.gov.   The website explains the National Flood Insurance Program, established by Congress to address both the need for flood insurance and to lessen the devastating consequences of flooding.  Premiums are based on geographic areas that FEMA defines based on studies of flood risk.  FEMA flood zones range from low risk zones to high-risk zones.  Low risk areas have a 1% annual chance of flood occurring.  High-risk areas have a 25% chance of flooding over the life of a 30-year mortgage.  At Floodsmart.gov, you can type in your home address to find your property’s flood risk

     After typing in my address, I learned why premiums are high in my neighborhood despite what would appear to be a good geographic location.  No digital map is available at this time, so the risk is designated as Zone D.  According to the cite, our area has possible but undetermined flood risk, so the flood insurance rates reflect the uncertainty of the flood risk.  Zone D has the third highest premium rate.

     What if I had a deductible of $25,000 or $50,000, I asked my broker?  Surprisingly, the maximum deductible is $5,000, which brought the premium down a third, now just a little over twice the cost of my homeowner’s premium. 

     I am discouraged the premiums are so high for what appears to be a low risk area.  Still, Hawaii is prone to occasional hurricanes and when the next one may hit is impossible to predict.  So continue to ponder the purchase of flood insurance.