(MONEY Magazine) – In early February, state and local officials throughout North Dakota and Minnesota issued a warning that every homeowner dreads: Prepare for a flood. Within six weeks, melting snow and ice had caused the Red River to overflow its banks by up to 14 miles in some areas, and thousands of residents had been ordered to evacuate their homes. The flood, the worst in the region's recorded history, ultimately displaced upwards of 60,000 people and caused 10 deaths and an estimated $1.2 billion to $1.8 billion worth of property damage. When MONEY toured the area in late April, we found hundreds of people living in temporary Red Cross shelters and others returning home to pump stagnant water from their basements. Adding to the tragedy, only about 7% of homes in the six major towns that were evacuated had flood insurance.

One nearby home that did: the Moorhead, Minn. ranch owned by Kelly Wakeland, 32, and Brad Flaagan, 35 (pictured on page 86). When they returned to check on the three-bedroom house in late April, muddy water was still lapping at their back door and filling their basement. "All of us are in shock," Wakeland, a waitress and mother of four, told MONEY. But thanks to flood insurance, which cost them $443 a year, their only financial setback is their $750 deductible. Most of their neighbors, in contrast, effectively saw their retirement savings washed away with their homes.

The Red River flood is just the latest in a string of extraordinary natural disasters that have battered the nation--and homeowners' bank accounts--over the past several years. From 1992's Hurricane Andrew, which caused some $30 billion in damages in the Southeast, to 1994's Northridge, Calif. earthquake, which cost about $25 billion, Americans have been reeling from one costly blow to the next. While no statistics exist on how likely your home is to be hit by a disaster, this much is clear: No one is immune.

Here are six tips on getting the insurance coverage you need--at an affordable price--so that you are prepared the next time Mother Nature rages at you.

--You should buy the most comprehensive homeowners policy you can afford. Today's industry standard is called Homeowners 3 (HO-3). Also referred to as "deluxe," such a policy insures you against damage from theft, vandalism and many acts of nature, including fire, hail and falling trees. Premiums vary by location: In Madison, Wis., a low-crime and low-disaster-risk area, you'll pay about $200 a year to cover a $100,000 house, according to State Farm Insurance. That compares with $1,000 in high-crime, hurricane-prone Miami. Note: Make sure you get a replacement-cost policy, which covers the full expense of replacing or repairing your damaged or stolen personal possessions up to a set dollar limit. A cash-value policy will reimburse you based only on your property's current market value--not what it would cost to buy new.

Keep in mind too that luxury items such as jewelry and furs are generally subject to low dollar limits. For instance, you must pay about $30 a year to insure every $1,000 worth of jewelry over the standard limit of $2,000 or so. Not covered under any type of standard homeowners policy are earthquakes, floods, sewer and drain backups, wars and nuclear accidents. If you live in an area with a lot of ground water, you can pay $20 to $80 to add sewer and drainage coverage to your policy; for earthquake and flood coverage, you will need a separate policy (see below).

--You may need flood insurance even if you don't live in a flood plain. About 10% of American households are in federally designated flood plains. If yours is one of them, you need flood insurance. (Your bank will require you to have it to qualify for a federally backed mortgage.) To find out if you live in a high-risk area, call the zoning department of your local or county government. If the answer is yes, get out your wallet. Federally backed flood insurance (the only kind available) for folks at high risk costs an average $300 a year for a $100,000 house.

Even if you're in a moderate- to minimal-risk area, you should consider flood protection. "Nearly 30% of our claims come from outside the high-risk areas," says Mark Stevens, a spokesman for the Federal Emergency Management Agency (FEMA), which administers the National Flood Insurance Program. The cost may be well worth the peace of mind: The cheapest premium in a low-risk area is just $85 a year. Not every insurance company sells flood insurance; to find one that does, call FEMA at 800-427-4661.

--If you live on the West Coast or in any area near a major fault, you should strongly consider earthquake insurance. So says David DeSantis, executive director of the Natural Disaster Coalition in Washington, D.C. But most people don't need it. According to DeSantis, "Americans in large parts of the country are highly unlikely to ever experience a sizable tremor." To find out about past and potential earthquake activity in your area, call your state's department of geology or visit the National Earthquake Information Center's Website (wwwneic.cr.usgs.gov).

Annual premiums can be inexpensive for folks who live in low- or moderate-risk cities: For a $100,000 house built in or after 1950 in Des Moines, for example, the yearly cost is just $15. Deductibles are reasonable: Most quake policies, offered by regular homeowners insurers, carry a deductible of 5% to 10% of the value of your house. Folks in earthquake territory, on the other hand, must pay more for less. For example, the most affordable option for residents of California is usually coverage through a joint public/private organization called the California Earthquake Authority. The CEA charges an average of $329 a year for a $100,000 home, and the deductible is a steep 15%. Make sure you shop around.

--If you have a home office, remember to insure it. At least 60% of home businesses are not adequately insured, according to a recent survey by the Independent Insurance Agents of America in Alexandria, Va. A basic homeowners policy typically insures only a computer and printer, up to about $2,500. If you have more equipment--say, several computers and a photocopier--you'll need to attach a rider to your regular policy. (Cost: $200 to $300 a year, depending on what you insure.) If you run a full-time business at home, get a separate business owner's policy. Such a policy will insure you not only against equipment damage but also against loss of revenue if you're forced to evacuate a damaged building. Premiums vary depending on the amount of revenue you expect to lose if your business grinds to a halt.

--Renters need disaster protection too. Take it from Grand Forks, N.D. resident Timothy Martin, 30. He lost $13,000 in furniture, electronics and other possessions in his rented apartment during the April flood. Reason: He didn't have insurance. Renters should follow the same general rules that apply to homeowners: Buy replacement-cost coverage, plus additional policies for floods and quakes if necessary. The only difference is that you won't pay to insure the building itself, just your possessions. Premiums vary; for example, you'd pay $91 a year to insure $25,000 worth of property in a relatively low-crime city like Des Moines but about $200 in a high-crime area like New York City.

--It's crucial to review your policy every two to three years. "People who have carried policies for years and have never updated them are at great risk," warns Cincinnati insurance agent Dan Dwyer. If you splurge on a new fur coat or build a deck, you'll need to adjust your policy accordingly.

Whether you're an owner or a renter in a flood plain or tornado territory, keep in mind that some minor tinkering can bring monthly insurance payments down by as much as 35%. If you simply raise your homeowners deductible from $250 to $500, for example, you'll save about 10% on premiums; from $250 to $1,000, you'll save 15%. Beefing up home security with smoke detectors and burglar alarms will knock your premium down another 2% to 5%. And you can shave up to 15% off your insurance policy by buying your automobile and homeowners policy from the same company. Finally, remember the recent lesson from the Red River Valley: Insurance can be costly, but it can be vastly more expensive to be unprepared.

Reporter associate: Natasha Rafi