MINNESOTA CITY, MINN. - For 44 years, Stan and Gerry Smith lived at 120 Minnesota St., one of the prettiest spots in their small town.

It was also one of the highest, so high that the Smiths never gave a thought to buying flood insurance.

In fact, not a single person in Minnesota City (population 235) has flood insurance.

Few homeowners in the affected area bought flood insurance, although nearly all could have, the Federal Emergency Management Agency (FEMA) reported Tuesday.

In the six-county area with 103,000 households, 718 carry federal flood insurance. In the two hardest-hit counties -- Winona and Houston -- 196 flood insurance policies have been issued for homes and businesses, according to a FEMA report.

"We will see more people sign up pretty soon -- we always do after extensive flooding," said Tom Lutgen, a hydrologist at the Minnesota Department of Natural Resources and the state's national flood insurance coordinator.

Homeowner's insurance does not cover flooding.

Statewide, 8,514 Minnesotans carry flood insurance, 627 of them in the six counties for which Gov. Tim Pawlenty declared a state of emergency.

"Flood insurance will be required of people who get federal low-cost loans or grants to repair or rebuild their flooded homes -- assuming the president declares this a disaster area," Lutgen said.

People who fix flood-damaged property by refinancing their homes also are likely to be required by lenders to get the insurance.

"There are a lot of misconceptions about flood insurance," Lutgen said, chief among them that a homeowner must live on a flood plain to buy it. "The fact is, 92 percent of Minnesotans qualify."

In Rushford, one of the hardest-hit areas, only two people have flood insurance, according to the FEMA report.

Larry Johnson, a Rushford City Council member, said he thinks the main reason residents, himself included, didn't have it was because they didn't think the area was in danger.

He noted that dikes in the region, built after 1965 flooding, were supposedly "lifetime" dikes. "Well, nature can come up with surprises," he said.

Communities must adopt FEMA standards, primarily using zoning to control development in flood-prone areas, Lutgen said. Outside of cities, county action is required.

The cost of flood insurance varies by proximity to flood-prone areas, type of structure and coverage -- typically as much as $250,000 for homes and $500,000 for businesses.

Those not on areas subject to 100-year floods may pay as little as $300 a year. In Stockton, the 20 people with insurance paid an average of $655 this year to buy an average of $108,355 in coverage.

Deciding whether to buy flood insurance is a gamble on what the weather will bring.