Note: This visitor put up is by David A. Thompson, CPCU, AAI, API, CRIS.
Did that flooding, not hurricanes, is probably the most frequent and dear pure catastrophe? One report said that nearly 90 p.c of pure disasters contain flooding, and since 2000 flooding has value U.S. taxpayers $850 billion. A overwhelming majority of flood occasions are uninsured. Over 75 p.c of flood injury from Hurricanes Irma and Harvey in 2017 was uninsured. Hurricane Ian in 2022 got here ashore within the Lee County (Ft. Myers) space. Data provided by FEMA confirmed that solely 30 p.c of the properties in that county had flood insurance coverage, and amazingly solely 50.4 p.c of buildings in excessive danger flood zones had been protected by flood insurance coverage by the National Flood Insurance Program (NFIP).
If a construction is secured by a federal lender in a high-risk zone, flood insurance coverage is required as a situation of the mortgage. This signifies that house owners of these high-risk buildings had no mortgage and elected to not buy flood insurance coverage. Just six weeks after Hurricane Ian made landfall, FEMA had obtained over 43,000 claims. Their knowledge confirmed that all through the trail of Hurricane Ian in Florida, solely about 20 p.c of the flooded buildings had been protected by flood insurance coverage. In central Florida, over 70 miles from the coast, rainfall exceeding 15 inches induced intensive flooding.
Flooding comes from a wide range of sources, and it’s not restricted simply to these dwelling in coastal areas. Over the previous few years, there have been extreme flood losses in Tennessee, Oregon, West Virginia, and Las Vegas. In Death Valley, California, in 2022, simply 1.7 inches of rain in a three-hour interval induced large injury to one of many driest locations on earth; dozens of automobiles sat in about three ft of mud. Flooding happens from storm surges in hurricanes, overflowing rivers, and really generally in Florida (in addition to all through the nation) from the fast accumulation of water from a thunderstorm. Some areas are recognized to flood after what appears to be just a bit little bit of rain.
A overwhelming majority of communities within the U.S. take part within the NFIP. Every construction sits in a flood zone, it’s only a matter of what the particular zone is. High-risk zones begin with the letters A or V, whereas low-to-moderate danger zones embrace zones B, C, and X. Too many customers assume, “I am not in a flood zone,” however they’re. The confusion possible comes from the requirement that any construction that sits in a high-risk zone should be protected by flood insurance coverage if there’s a lender concerned. Confusing “required to have flood insurance” with “should have flood insurance” is widespread. Remember, too, that FEMA knowledge has proven for many years that about 25 p.c of all {dollars} paid underneath the NFIP go to these buildings in zones B, C, and X … the place lenders usually don’t require flood insurance coverage.
After virtually each main flooding occasion, there are at all times information tales of customers standing in knee-deep water saying, “I thought my homeowners policy covered flooding.” In normal, owners insurance coverage insurance policies and business property insurance coverage insurance policies don’t cowl losses brought on by flooding. That is especially troublesome with occasions like Hurricane Ian, which induced injury from each wind and flood. Without flood insurance coverage in place, customers are sometimes left attempting to persuade a owners insurance coverage firm to cowl losses brought on by flood…a troublesome debate to be concerned in (and often unsuccessful). Carrying each property and flood insurance coverage insurance policies places the patron in the very best place.
The NFIP offers about 85 p.c of the flood insurance coverage within the U.S. The most limits out there haven’t modified since 1994, with these limits being $250,000 of constructing protection on one-to-four household dwellings and $100,000 of contents protection out there, and $500,000 of protection out there for business buildings (similar to places of work and eating places) and $500,000 of contents protection out there. FEMA knowledge exhibits that over one-third of all insurance policies are written at most limits, with that determine being even increased in coastal states and high-net-worth areas. That signifies that extra flood insurance coverage above the NFIP limits is usually wanted. Premiums fluctuate based mostly on the specifics of the constructing, however ranking components embrace the quantity of protection, sort of construction, elevation above floor stage, and proximity to any flooding supply. At occasions, the fee may be measured as “just a few dollars per day…less than many people spend each day at their favorite coffee shop!”
Some non-public insurance coverage firms (Not the NFIP) write flood insurance coverage in sure areas of the nation. In normal, these insurance policies present protection that’s higher than NFIP by increased protection limits, higher protection, and at occasions a cheaper price. Whether the NFIP or a personal insurer is a greater possibility takes a dialogue with a professional insurance coverage agent.
The Takeaways:
- Flooding causes billions of {dollars} of harm annually.
- Too many customers don’t buy flood insurance coverage, leading to vital out-of-pocket prices.
- The value of flood insurance coverage is, at occasions, cheap.
- Everyone is in a flood zone.