Because of climate change, Spencer Glendon -- a senior fellow at the Woodwell Climate Research Center, one of the world's most respected climate think tanks -- said recently that it may not be long before every homeowner in the country will need flood insurance.
But every homeowner in the country should have flood coverage already, because floods can happen anywhere, anytime and for practically any reason.
Glendon said that once-in-a-century rain events could become once-in-a-decade because the air is warming to a point where big rainstorms contain around 20-25% more water. For every degree warmer the air gets, he said, it holds 7% more moisture.
"That's why storms are bigger," he told an Urban Land Institute meeting. "This is not an opinion. It's science."
Rain is certainly the major cause of floods, but there are others: Water mains collapse, dams break, snow melts and water runs off from nearby construction projects.
Even an inch of water can cause $25,000 worth of damage to your house, according to the National Flood Insurance Program, a federal agency that writes the vast majority of flood policies. And your regular homeowner's policy does not cover flooding.
Flood coverage is required if your place is located in a high-risk flood area and you have a government-backed mortgage -- that is, one purchased from your lender by Fannie Mae or Freddie Mac, insured by the Federal Housing Administration or backed by the Department of Veterans Affairs. It's not required if you live outside a high-risk area, but your lender may still compel coverage.
Whether it's required or not, though, you should consider it. Unfortunately, most people don't, according to analyst Chris Moon at ValuePenguin.com, a personal finance website.
Moon's look at the 100 largest cities found only four active policies for every 10 houses located in what the Federal Emergency Management Agency designates as 100-year flood plains. But those are concentrated in regions like the Gulf Coast and Florida, where owners are well aware of the potential for flooding.
"Homeowners in 100-year flood plains do not realize their homes have a 26% chance of being flooded," Moon says.
Worse, perhaps, there are fewer than two active policies for every 100 houses in high-risk flood areas such as Detroit, Cleveland and Minneapolis.
Moon says the average annual cost of a flood policy is $708. But the good news is that you are no longer limited to a sometimes-expensive government policy: Private insurers are quietly moving into the market.
Thanks to a change in the rules, according to Scott Giberson of CoreLogic, a data analytics firm, written flood premiums by private insurers have increased more than 70% nationwide, and more than 200% in some states. Now, it is estimated that some 80 players are offering coverage, including a few giants like Lloyds of London.
In an effort to underpin the private market, states are getting into the act, too. Giberson reported at a recent Mortgage Bankers Association conference that 20 states have passed laws or are considering bills supporting the market. Florida's law, which allows the state's insurance commissioner to certify that private policies are in compliance with federal standards, is considered a model statute.
But there's a rub: Lenders do not have to accept policies that fail to meet Uncle Sam's requirements. Lenders and their regulators are still ironing out the rules, but private policies must include the same 45-day cancellation period found in NFIP policies.
Some private policies give their clients just 30 days' notice, warned Stacy Christian of RoundPoint Mortgage. "Is 30 days really enough time for borrowers to find another policy?" she asked at the MBA meeting.
We'll leave that question to greater minds. But it's a good idea to know exactly what's covered by any private policy you're considering. Otherwise, it may not be as good as the government alternative.
"You really do need to do your homework," said Jane Mason of Clarifire, which helps lenders automate their business processes.
"Watch out for exclusions," said Christian. "We're seeing more and more of them. Lenders will be looking for them, too, but you should be proactive."
One example of a dubious exception: Some private policies exclude mud flow, which is defined as a river of liquid flowing on the surface of normally dry land and carried by a current of water. NFIP's policy says that's a covered event. So is erosion caused by waves or currents exceeding normal tidal flows.
In other instances, though, private outfits are doing the government one better. Whereas NFIP gives its insureds just one year to file suit if a claim is denied, some private insurers grant people two years to act. And while there's a 30-day waiting period for federal coverage to go into effect, some private outfits offer shorter waiting times.
Something else to consider: The survival of private insurers does not depend on the whim of Congress. Lately, the NFIP has been funded in short-term spending bills. While it is doubtful lawmakers will ever let the program lapse into oblivion, it may not be able to meet policyholders' claims if lawmakers are slow to act.
But it could be "problematic" if you drop a government policy for a private one and then decide to go back, Mason said in a phone interview. You'll still have to wait the 30 days, so she advises keeping your private coverage in force "until your federal policy kicks in. You have to manage the timelines proactively."
If warranted, Mason also suggests adding a private policy on top of the government policy, because the maximum coverage is $250,000. In other words, if your place is worth, say, $400,000, you might want add some extra coverage.
And never, ever miss a payment on a required policy or let it lapse. If you do, your lender could put another flood package in its place, and that could be extremely expensive. "Force-place insurance is costly," Mason warned.