Flood insurance misconceptions debunked
Many homeowners who need flood insurance do not have that protection in place. Why?
Homeowners have long been confused about flood risk and flood insurance. According to a recent survey, that unfortunate fact continues to lead to devastating outcomes. Consider that 98% of homes in California don’t have flood insurance policies in place, leaving nearly all unprotected from the torrential onslaught of recent storms.
The Neptune Consumer Survey of Flood Risk Awareness shows that consumers urgently need education about flood risk and flood insurance.
Many homeowners who need flood insurance do not have that protection in place. Why? The Neptune survey revealed:
- Misunderstanding that their home insurance policy covers flooding, when it does not;
- Perception that the risk of flooding at their home is lower than it really is; and
- Flood insurance is often not mandatory, unlike home and auto insurance.
Statistically speaking
The study was conducted in partnership with the University of South Florida Customer Experience Lab in St. Petersburg. It reveals that despite the confusion, consumers do recognize the risk of flooding and a majority characterize flood risk to be an important factor in their home purchase decisions. In a potential nod to climate change awareness, a sizable majority reported that their homes are at greater risk of incurring flood damage in the coming years as opposed to the past.
Among the study’s other key findings:
- 85% of homebuyers think flood risk is an important factor in a home purchase decision;
- 65% believe the risk of a flood is higher now than it was in the past;
- Older respondents believe they are at a lower risk of flooding in the next five years than; their younger respondents;
- 19% of homeowners erroneously don’t think their property is in a flood zone; and
- 17% of homeowners don’t know the FEMA flood zone in which their home is located.
Among the 266 respondents who claimed not to have a flood insurance policy, the most cited reason (60.9%) was, “I don’t believe I’m at risk,” while 30.4% said, “It’s just not on my mind.” Almost 30% cited not having the disposable income, and 27.8% cited that flood insurance was too expensive.
Underinsured and overconfident
The survey shows that almost 43% of respondents feel they’re at moderate risk of flooding in the next five years. That is more proof that too many homeowners feel they’re immune from flood risk, especially considering current government data on the topic. The most recent statistics from FEMA show that 99% of counties in the U.S. have been impacted by a flooding event. So it’s only a matter of time before every community experiences the unfortunate wrath of Mother Nature.
The study’s most alarming finding was that almost 75% of respondents claimed to have flood insurance, while nationally only 5% are actually insured for flood.
Education is critical and is the responsibility of insurers, including the National Flood Insurance Policy carriers as well as private flood providers.
Insurance agents also have a key roll to play. Agents have the ear of the consumer and represent a vital way to help educate consumers of this catastrophic, high-cost risk. The statistics point to the fact that flood coverage should be top of mind for consumers. Unfortunately, many homeowners seek to protect their home only after their community has been affected by a flood event such has 2022’s Hurricane Ian or this winter’s storms in California.
Homeowners have two great options, the NFIP and, thanks to innovation and technology, easy-to-purchase private flood insurance that can bring peace of mind to property owners across the U.S.
Trevor Burgess (trevor@neptuneflood.com) is president & CEO of Neptune Flood. Any opinions expressed here are the author’s own.
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