Logic should lead in flood protection
Relying on laws rather than logic to protect property is not only a bad idea, it can prove costly.
Imagine an individual is driving around house-hunting. The person spots a real estate sign in front of a particularly nice house that reads, “No flood insurance required!”
Many people will immediately look at this in a positive light. But the reality is that “no flood insurance required” does not necessarily mean “no flood insurance needed.”
Even though homeowners in FEMA-designated Special Flood Hazard Areas (SFHA) are required by law to have flood insurance in order to obtain a federally-backed mortgage, this approach to coverage is full of holes. Relying on laws rather than logic to protect property is not only a bad idea, it can prove costly.
Flawed approach
Many homeowners buy the coverage but drop it in subsequent years if the bank or lender does not enforce the flood insurance provision. Further, many homeowners without mortgages opt-out of flood insurance entirely, leaving them susceptible to losses beyond their means.
The National Flood Insurance Program (NFIP) is an option that many turn to for flood insurance, but it’s not without serious shortcomings. The NFIP limits building coverage to $250,000. But a large percentage of homes in the U.S. are worth much more than that. The result: Many property owners who turn to NFIP for coverage are under-insured.
Outside of Special Flood Hazard Areas
Some homeowners are under the false assumption that they are safe if their property is outside of the SFHA. This is false, however. Consider Hurricane Harvey: A surprising 74% of claims from the storm were outside the SFHA. Even worse, 70% of homes with losses due to Hurricane Harvey and Florence were uninsured, a common — and unfortunate — scenario.
Even homeowners that do receive financial support through FEMA are often not able to use those proceeds to rebuild their homes. In fact, according to FEMA and the NFIP, the average FEMA grant is just $5,000, while the average loss is $46,000.
Logic must prevail
Conventional wisdom says, if you own a home near the coast, you face a higher risk of flooding. If you live near a river that has flooded in the past — at any time — you have a risk of flooding. Climate change is driving higher flood levels, heavier rains and stronger storm surge.
And still, homeowners too often pass up the chance to protect their property. These individuals assume their homeowners insurance covers property damage due to flood, but it does not. Flood is a separate risk, created from rising water on the homeowner’s and adjacent properties. Homeowners insurance covers water from leaks within or from above the house, but not from outside the house.
An estimated 62 million homes should have flood insurance. But only 5.1 million do. With coverage as low as $1 per day, logic, not laws, should prevail.
Jim Albert (jim@neptuneflood.com) is CEO of Neptune Flood in St. Petersburg, Fla. These opinions are his own.
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