Who Needs Flood Insurance? The Answer May Surprise You

The 2017 Atlantic hurricane season is shaping up to be one of the worst seasons in over a decade. Earlier this year, the National Oceanic and Atmospheric Administration (NOAA) forecast up to 17 named storms for the season, and Tropical Storm Risk (TSR) predicted three major storms rating Category 3 or higher.

A motel demolished by Hurricane Harvey in Rockport, TX. (Photo Credit: The Texas Tribune)

On August 25, Hurricane Harvey became the first major hurricane to make landfall in the U.S. since 2005. As a Category 4 storm, with sustained wind speeds up to 130 miles per hour, Harvey battered the Texas Gulf Coast, causing significant structural damage in the Rockport and Fulton area and several other coastal towns. As the storm moved inland, the winds subsided to tropical storm levels, but record-breaking rainfall (more than 50 inches in 48 hours in some cases) caused historic flooding in Houston and other South Texas cities. (For perspective, the storms that caused historic flooding in the Midwest earlier this year delivered 10-15 inches of rain in a week.)

Harvey could end up being the costliest natural disaster in U.S. history. At least 60 deaths have been attributed to the storm and related complications. Some 200,000 homes were damaged, leaving more than 1 million people displaced. Texas Governor Greg Abbott has estimated the damage at $150 – $180 billion.

>> Fast Fact: In 2012, Superstorm Sandy caused 150 deaths in the U.S. and $71 billion in damages.

Now a second major storm, Hurricane Irma, is barreling through the Caribbean with the potential to make landfall in Florida, including Miami and the Keys. Already a Category 5—and the strongest storm ever recorded outside the Caribbean and the Gulf of Mexico—if Irma does strike the U.S. as a Category 3 or higher, it will be the first time two major storms have struck the U.S. in the same hurricane season.

Dealing with a hurricane’s aftermath

As people in Irma’s path prepare for the worst, those recovering from Harvey are dealing with the storm’s aftermath – wind-damaged and flooded homes, water-soaked belongings, electricity and water outages, and financial loss. And while many homeowners are working with their insurance companies to document the damage and file claims, a staggering number of those affected by the flooding have no flood insurance.

Hurricane Harvey produced record rainfall and flooding in Texas. (Photo Credit: Popsugar)

According to analysis from Corelogic, “52 percent of residential and commercial properties in the Houston metro are at ‘High’ or ‘Moderate’ risk of flooding [due to the hurricane], but are not in a Special Flood Hazard Area (SFHA) as identified by the Federal Emergency Management Agency (FEMA).”  The report also stated that 44% of properties in the affected areas of South Texas are at high or moderate risk of flooding from the storm, but are not within the “Extreme” or “Very High” SFHA risk zones.

Properties outside SFHA zones are not required to have flood insurance, so it’s likely that many of these properties are not insured against flooding due to natural disasters. Since flooding isn’t covered by homeowners insurance, and less than 20% of homeowners purchase special flood insurance, for many affected by Harvey the associated costs will come out of pocket.

>> Fast Fact: The average insurance claim for flooding is $30,000, although just 6 inches of water could cause damage in excess of $39,000 to a 2,000-square-foot home. (Source: Houselogic)

Anyone affected by Harvey can apply for FEMA disaster assistance, which may alleviate some of the financial burden for homeowners. Additionally, the department of Housing and Urban Development (HUD) has announced disaster assistance for the approximately 200,000 FHA homeowners in the affected area. HUD assistance includes reallocation of federal funds to repairing and rebuilding costs, a 90-day moratorium on foreclosures, and special financing for new mortgage loans.

Should you have flood insurance?

In light of the Texas flooding, as well as the Midwest flooding earlier this year, you might be asking, “Should I have flood insurance?”

To answer that, you first need to know your risk of flooding. If your home is in an SFHA zone (with an “Extreme” or “Very High” risk of flooding), you should already have flood insurance (it’s required by all federally insured mortgages). As with any insurance, it’s always a good idea to review your policy to make sure you understand the coverage, exclusions and deductibles.

Even if you aren’t required to purchase flood insurance, it doesn’t mean your home is safe from flooding. You may live near an SFHA zone, but just across the border. You may live in an area where flooding risk is “High” or “Moderate” (as opposed to “Extreme” or “Very High”). There are also areas of the country that haven’t been studied yet and do not have an assigned flood risk.

A home outside but near the SFHA zone. (Photo Credit: Housefax)

It’s interesting to note that properties in moderate and low risk flood zones account for more than 20 percent of flood insurance claims and receive a third of flood-related federal disaster assistance. So, while knowing your flood zone is a good place to start, it shouldn’t be your only consideration. It’s also good to know the history of natural disasters in your area. And if you haven’t been in your home since it was built, you’ll want to find out if there was ever any damage to the home due to flooding; check the building permit history, and consider a home inspection if one wasn’t done when you bought the home.

Other factors may also affect flooding. The Houston floods ignited a debate about whether the city’s sprawling development and extensive “impervious surfaces” had exacerbated the flooding by preventing run-off. While the debate is ongoing, it is worth considering how much heavy rainfall the area around your home could withstand, and if the surrounding infrastructure could contribute to sending floodwater your way.

After doing your research, consult your insurance company. In addition to flood insurance options, your agent can help you understand if flood insurance is commonly purchased in your area. Ultimately, though, the decision is up to you.

Keep in mind that most flood insurance policies take 30 days to take effect. And just in case this all isn’t enough to make your head spin, you should know that the National Flood Insurance Program (NFIP)—which provides all but a tiny portion of flood insurance policies in the country—is set to expire on September 30 (yes, the end of this month). A bill to reauthorize and extend the program is with Congress, but has been subject to debate (which is likely to get more heated in the aftermath of Harvey).

>> Fast Fact: The majority of properties insured by the NFIP are in Texas and Florida.

In 2010, the NFIP was allowed to lapse, preventing new policies from being written until it was reauthorized—and stalling home sales for properties that require flood insurance. The lapse delayed an estimated 40,000 home sales per month according to the National Association of REALTORS®. So if you’re buying a home, be sure to find out now if flood insurance is required on the property.

Get your Housefax Report today for information on your home’s flood zone proximity, previous natural disasters and building permits history!

2 thoughts on “Who Needs Flood Insurance? The Answer May Surprise You

  1. Rich Witt

    Great information here. Flooding can really do some massive damage and if the water hasn’t been removed and the placed dried out quickly, mold can grow which gets even more expensive. I just hope the Houston community recovers quickly and hopefully Irma won’t be too bad. I think we all underestimate the additional long term damage to people’s businesses, job, real estate, additional insurance costs, etc.

    1. Debra Jennings Post author

      Glad you liked the post, Rich. It’s true about the long-term damage. All the photos of damaged items lining neighborhood streets just begin to paint the picture. Let’s hope hurricane season is over!

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