Check the Fine Print on Flood Insurance

The heavy smell of mildew and the dark stains of dry mud scar every room of Georgina and Joel Alaniz’s northeast Los Angeles home.

The couple and their two young children were awakened early one morning last month during a heavy storm to find a virtual river of mud cascading down their steep backyard hill and into their modest two-bedroom home.

Within hours, about six inches of muddy goo covered floors throughout the entire house, causing at least $20,000 damage--none of it insured.

“We have no coverage and we’re feeling a lot of stress,” Georgina Alaniz said last week as she showed a visitor the buckled, moldy interior walls in dire need of replacement and damaged belongings stiff with dried mud. “I was happy to own a house, but not anymore,” she said.

She said she and her husband, both Mexican immigrants and first-time home buyers, assumed all along that their basic homeowners policy offered flood protection.

And according to a nationwide survey commissioned by the Federal Emergency Management Agency’s (FEMA) National Flood Insurance headquarters in Washington, D.C. that misperception is a common one.

The survey, conducted last year, showed 67.4% of U.S. property owners are unaware that flood insurance is not included in basic homeowner policies.

“That’s a real horrendous error to learn after the fact if you are flood damaged,” said Jack Eldridge, chief of the Region 9 FEMA flood insurance branch in San Francisco.

Throughout California there are about 800 areas considered potential flood zones. While many of those are considered only minimally threatened by flooding, large regions are classified special flood hazard areas, or areas in which the federal government has determined there’s a 1% chance that a 100-year flood or worse may happen in any given year.

Still, about 75% of all California houses and businesses in these high-risk zones have no flood insurance, according to the National Flood Insurance Program (NFIP).

“Most people just don’t buy insurance willingly,” Eldridge said. “It doesn’t matter what kind of insurance.”

Eldridge cites as an example Johnstown, Penn., a community that is frequently hit by serious floods as was the case in 1971, three years after flood insurance became available.

“Our people rushed out there to see what tremendous things our insurance had done,” he said. “And guess what we found? No one bought it.”

As a result, Congress passed the Flood Disaster Protection Act of 1973, under which lenders must require borrowers whose property is located within a high-risk flood zone to buy flood insurance as a condition of receiving a federally backed mortgage.

However, commercial lenders who do not sell their mortgages in the secondary market are not bound by the law. And, Eldridge said, other lenders who are required to follow the law, don’t, and without penalty. As a result, many residents who would do well by having the insurance don’t even realize they need it.

Moreover, flood officials warn that major rainstorms, such as those that have recently hit the Southland, can cause flooding anywhere.

“You should think about it,” Mary Crystal, spokeswoman for the Los Angeles-based Western Insurance Information Service, said regarding flood coverage. “A lot of Californians just don’t have flood insurance because it doesn’t happen very often. It’s not like the earthquakes we anticipate.”

Flood insurance will cover losses due to conditions of general flooding, such as surface flooding, flowing water or liquid mud that flows like a river. Mudslides or landslides, while often triggered by a flood, are not covered because damage from them “is caused by the falling mass of rock or earth, not the water,” according to the NFIP guidelines.

“If you look at the material that did the damage to a house and stick a shovel in it and 80% to 90% runs off, that’s mudflow,” Eldridge said. “If instead the majority of it stays on the shovel and the stuff falls off in chunks, that’s mudslide.”

In the case of mudslide, there is little a property owner can do except pay for damages out of pocket or, if the region has been declared a federal disaster area--which happens in less than half of all flooding incidents nationwide--seek a low-interest disaster loan.

Flood insurance is sold by the federal government through established and licensed property casualty agents throughout the state. But Eldridge advises anyone seeking such coverage to buy it only through an agent who understands the flood insurance program and is experienced in writing such policies.

Deborah Young, an agent with State Farm Insurance, said no matter what kind of damage a property owner suffers, the first order of business is immediately contacting the insurance agent.

“We don’t have any kind of policy for mudslides,” she said. “But there may be other coverage, like temporary living expenses if your home becomes uninhabitable.”

Often, soil geologists are called out to determine whether a mudslide or mudflow caused damage. But because it may be several days before an agent or soil expert visits a damaged house or business, it’s important to document the damage with photos or videos.

To determine whether you need to buy flood insurance for your home, business or personal belongings you have in a rented apartment or house, you must check NFIP’s Flood Insurance Rate Maps (FIRMs).

Each community participating in the NFIP has one on file, either with city or county officers.

The maps are updated every seven years and show the likelihood of flooding in a given area.

But Eldridge warns that a recently built subdivision or other development that can be affected by flooding may not show on the maps.

“Ask the clerk if there’s been any changes in the area since the map came out that would exempt you from a flood area or that might cause more flood risks,” he said.

But no matter where you live, Eldridge said he recommends that everyone, especially those about to buy a new house, check the federal flood maps and then take time to walk through the neighborhood, keeping an eye out for creeks or levees that might cause problems.

Even hillside dwellers far above flood plains need to be aware.

“You may be high on a hill with a lovely view,” he said. “But higher up there may be a creek flowing down on you.”

Georgina and Joel Alaniz learned that the hard way. Unable to afford the repairs caused by the mudflow into their home, they’re now considering walking away from it all.

“We’ve always dreamed about owning a home,” said Joel Alaniz, “but I’m probably going to have to declare bankruptcy and we’re just going to give up the house.”

Flood Protection Number of flood insurance policies California: 200,431

Los Angeles County: 12,622

Orange County: 50,979

San Diego County: 4,773

Riverside County: 5,340

San Bernardino County: 4,529

Imperial County: 58