Thousands of Homeowners in the path of Hurricane Dorian Cancelled Their Flood Insurance

11 Sep

According to a recent analysis by E&E News of government data, tens of thousands of homeowners who were in the path of Hurricane Dorian dropped their flood insurance in recent years. The analysis found that both homeowners and owners of commercial buildings have been giving up their flood insurance policies despite the fact that their properties were in a high-risk flood zone and they were required under law to maintain flood insurance.

Dropping coverage could end up being a huge mistake for homeowners in North Carolina and South Carolina as widespread flooding hits the area. “Individuals are going to wake up tomorrow and look at their homeowners policy and realize the damage to their home isn’t covered, warned Anna Weber, a senior policy analyst and flood insurance expert at the Natural Resources Defense Council in a recent E&E News article. 

Thousands Drop Coverage

When E&E News analyzed the data they found that there was a major decline in the number of federal flood insurance policies in the 59 counties in Florida, Georgia, North Carolina and South Carolina that were under evacuation orders related to Dorian.

The government data showed that on September 4th, 2011 there were 734,445 federal flood insurance policies in force in these 59 counties. This number was down to 508,731 policies on September 4th,2019, which is a whopping 31 percent decline. 

The decline in flood insurance coverage in these counties reflects a nationwide trend that has seen homeowners dropping flood insurance despite the efforts of the federal government to try to increase coverage as climate change intensifies storms, leading to more flooding. 

Flood damage is excluded from almost all homeowner insurance policies, requiring homeowners to carry a separate policy to fully protect their home. Flood insurance can be purchased through the National Flood Insurance Program (NFIP) or private insurers. The majority of flood insurance is sold through the NFIP. 

If your home is flooded and you are not carrying a flood insurance policy, you will be on the hook for repairs or rebuilding your home. It is possible to get a low-interest loan from the Small Business Administration, but in the end, the entire cost of repairs will come out of your pocket. 

The E&E News analysis only includes policies purchased through the government’s National Flood Insurance Program. It excludes private market policies. While some property owners may have switched from the NFIP to private coverage, the majority of flood insurance is still sold through the NFIP.

Feds Trying to Increase Coverage

It’s not only the southern states that have seen a decline in NFIP policies. Nationwide, flood insurance policies have dropped from 5.65 million in 2011 to 5.2 million in 2018. 

“A lot of the time what you’ll see is a big spike after a big flood event as people realize flood insurance could be a good investment. Over the next few years it sort of tails down,” said Weber of NRDC in the E&E News article. “There is a certain amount of flood amnesia that happens in communities where a flood doesn’t happen for a while and you want to put your money toward other things.”

One reason that the number of flood insurance policies in effect is dropping is cost. Premiums have gone up as a new law that was passed in 2012 resulted in premium increases and in some cases, they were quite dramatic. The law was put in place to help reduce the number of policyholders whose policies were subsidized by the federal government, making the premium reflect the actual risk the property presented. 

While flood insurance can be expensive it is one of the best ways to recover from flood damage and can be a financial lifesaver if your home is severely flooded.  FEMA has been pushing flood insurance and has a goal of doubling the number of homeowners with flood insurance by 2023 with the help of the private market. 

Federal law requires homeowners to have flood insurance if their property is in a high-risk flood area and have a federally backed mortgage. However, many people ignore this requirement, FEMA estimates that roughly two-thirds of property owners who are required to carry flood insurance do not carry it. 

The NFIP program has been in financial trouble for years and over the last few years Congress has been working to overhaul it but have not been able to come to an agreement. 

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