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GOVERNMENT HELPS THOSE WHO BUY FLOOD INSURANCE.

Byline: Karyn Hunt Associated Press

They gambled and lost. Now they'll have to pay on both ends - for repairs and for insurance.

Homeowners and business owners who risked going without flood insurance before this month's disastrous Western floods will have no choice but to buy insurance now if they want help from the government.

Federal law enacted in 1995 requires homeowners and businesses in flood zones to buy flood insurance as a condition for getting low-interest government loans to rebuild or repair damage.

``The help people get is not without strings attached,'' state Insurance Commissioner Chuck Quackenbush said Friday. ``They are becoming much more strict about that. Congress has said they want people taking care of themselves on the other end.''

Currently, only 10 percent of Californians carry flood insurance, and only 25 percent of those in flood plains are covered.

Yet many more than that will need help when the waters recede. Already, 6,085 people have registered for damage funding, either in the form of insurance reimbursements or low-income loans from the Small Business Administration, coordinated through the Federal Emergency Management Agency, according to Ron Bearse of FEMA and the state Office and Emergency Services.

Those who have insurance obviously will be better off, Quackenbush said.

Contrary to popular belief, flood insurance isn't as expensive as it might seem and is easy to get. That is because the federal government sells policies through almost any private insurer.

The cost on average is $300 per year for $250,000 in coverage on structural damage and $100,000 for furniture and other household contents. The deductibles range from $750 for homes inside flood zones to $500 outside.

Although the government is involved, taxpayers don't pick up the tab because reimbursements are paid out of a $90 billion reserve built by premiums collected nationwide.

Very few commercial policies are sold because U.S. tax structures prevent private insurance companies from holding enough reserves to pay off the mountains of claims that inevitably follow a major natural disaster.

Most basic homeowner policies cover most perils except mudslides, earthquakes and floods.

For those who don't have flood insurance, there is no guarantee of help.

Not everybody who is uninsured is guaranteed the low-interest government loans that have become such a staple of natural disasters. Convicted felons and those who are financially strapped or default risks will be denied. And in some cases, people who knowingly built or rebuilt in flood plains in recent years without obtaining insurance will not get loans.

But even they will find help, FEMA litigation specialist Ken Nauman and Quackenbush said. Some cities give zero percent loans to avoid the blight that abandoned and damaged properties create. And the state will find some way to lend a hand, Quackenbush said.

``They'll move heaven and Earth to take care of consumers to make sure they get back on their feet,'' Quackenbush said.

The government's willingness to help should not be an invitation to fudge figures, though, they said. Auditors and adjustors watch closely for fraud and have punished those who attempt it. Penalties are immediate repayment of the loan plus an additional penalty of 50 percent of the amount.

``We train the inspectors to be observant enough to try to spot that kind of thing,'' Nauman said. ``You'd be surprised how foolish people are in trying to attempt crimes.''

He cites examples of people filing for damage to basement rooms constructed underneath flood stilts. Building underneath elevated homes is a violation of rules because it defeats the purpose of raising the structure.

There are differing views on whether this year's floods will affect future rates. Quackenbush says they won't because most policies are federally subsidized and because flood damage is less expensive to repair than earthquake damage, which more often causes major structural weakness.

But at least one industry representative, Sam Sorich of the National Association of Independent Insurers, expects commercial premiums to go up moderately because of the sheer volume of claims to be filed.

``Those are going to show up in future rates,'' he said.

CAPTION(S):

Photo

Photo: (color) A home in Manteca sits isolated by floodwaters that swamped communities in central California.

Associated Press
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Article Details
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Title Annotation:Business
Publication:Daily News (Los Angeles, CA)
Article Type:Statistical Data Included
Date:Jan 14, 1997
Words:698
Previous Article:FDA MAY PULL PLUG ON SELDANE.
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