HURRICANE KATRINA WAS a horrific wake-up call to homeowners and renters nationwide who don't have flood insurance.

Only 40% of the residents in the flooded areas were covered by a policy, according to the Federal Emergency Management Agency (FEMA). Most of those who did were required to have flood insurance in order to obtain a mortgage.

The 60% of folks who didn't have flood insurance fall into two categories: They were either renters, and therefore not required to purchase the insurance (although they could have), or they were homeowners with no mortgage (who also had the choice but not the requirement of purchasing coverage). Needless to say, this uninsured group faced a grim reality. Regular homeowners' and renters' policies cover damage from wind or rain water that comes from above but not water that comes from below. These folks had to rely on federal disaster aid to repair the damages.

Is your home at risk for flood damage? If so and if you don't already have a policy now's as good a time as any to act.

Fortunately, flood insurance is relatively inexpensive, and purchasing a policy is simple. But that doesn't mean everyone needs it. "Don't just buy it," says Robert Hunter, director of insurance at the Consumer Federation of America. "Do some research. Obviously, if you're on top of the hill or mountain, you don't need it."

Here's how to figure out whether you need flood insurance and how to buy it.

The Basics
Unlike homeowners policies, flood insurance is underwritten by a single source the National Flood Insurance Program (NFIP), which is administered by FEMA. The policies themselves, however, are sold and serviced by regular insurance companies. In other words, you needn't go further than your insurance agent to get a flood policy, since your premium will be the same no matter who your insurer is. Currently, about 90 companies including virtually all the big homeowners insurers offer flood insurance. (For a list of participating companies, see the FEMA web site

On average, premiums run about $400 a year $600 to $700 in high-risk areas, according to FEMA spokesman Edward Pasterick. (Rate increases are capped at 10% per year, although proposed legislation aims to hike the cap to 15%.)

The bad news: Flood insurance coverage is limited to $250,000 for building property and $100,000 for personal property, which might be inadequate for those living in areas where real estate values have increased substantially over the last few years. In those cases, Pasterick says, private insurers may offer supplemental coverage on a case-by-case basis.

For more on renters insurance, read our story

Do I Need It?

Homeowners don't always have a choice in purchasing flood insurance. If you live in a designated high-risk flood zone which FEMA defines as a 100-year flood plain, meaning the area has a 1% chance of flooding in any given year during a 100-year period you are required to get flood insurance in order to obtain a mortgage.

According to FEMA, about 10% of the country is a high-risk flood plain, mostly in river and coastal areas. (FEMA has no data on the actual percentage of the population that lives in these areas.) Obviously, if you live in one of those areas and you don't already have a policy purchasing flood insurance is a smart thing to do.

The fact that 40% of the people affected by Katrina had flood insurance was impressive given that in previous storms roughly 10% of those affected by a flood were insured against it, Hunter explains. Of course, in New Orleans the need for flood insurance was quite plain. "You could look up at the ships going up the Mississippi river, and the bottoms of the ships were higher than your head," he says. "It was very obvious that if the levees break, you'll have water all over the place."

That's not the case with the most other areas. In fact, FEMA estimates that two-thirds of Americans who live in a high-risk area don't have flood insurance. "People tend not to think it's going to happen to them," says Jeanne Salvatore, a spokeswoman for the Insurance Information Institute, a New York-based trade group.

Perhaps the best way to ascertain your risk is to check local elevation maps, which are created specifically to help communities to gauge flood risks. In order to participate in the NFIP (so that residents have the option of getting flood insurance), your community must have a flood insurance map, Hunter explains. On this map, you can see your property and elevation compared with the 100-year storm (the term insurers use to describe a storm that has a 1% chance of hitting in any given year).

"Let's say your ground is at 20 feet and the 100-year storm is at 30 feet," Hunter explains. "You know that in a 100-year storm you have 10 feet of water in your yard." Your next question: How high off the ground is your first floor? If it's 10 feet or greater, you're probably OK, he says.

Flood maps should be available at your local city hall or from your insurance agent. Alternatively, FEMA offers maps for all communities participating in the NFIP in its online Flood Map store. You can start your search by state and narrow it down to your specific county and community. Online access is $1.50 per map; paper copies are $2 each.

Hang On to Your Policy
If you decide to purchase flood insurance, be sure to keep your policy in force. "I ran the flood insurance program years ago, and I noticed that in the wake of a big flood, people would run and buy flood insurance. But a year later, they let it drop," says Hunter.

Finally, keep in mind that once you buy a policy it takes 30 days to kick in. So don't wait until you hear there's another hurricane coming your way by then you may be too late.

For more details on flood insurance, check out the NFIP's consumer web site.