October 30, 2024
—
In the wake of hurricanes and storms, many households face long and costly recoveries. That’s partially because few of those affected by storms are insured against flooding: For example, when Hurricane Helene hit Buncombe County, which comprises Asheville, less than 1% of homes and businesses had flood insurance.
While flooding is widespread and destructive — in the last 20 years, 99% of U.S. counties saw a flood — relatively few homeowners have coverage to protect against such impacts. So when flooding hits, homeowners are left on the hook for nearly all damages.
But you don’t need a Helene-type storm to see the impacts, and financial costs, of flooding: Just one inch of flooding can cause $25,000 in damages to a property. And as storms become stronger and flooding becomes more frequent, the problem will only get worse.
That’s why flood insurance is so important: It’s one of the only ways you can financially protect your property and belongings when flooding strikes.
What is flood insurance?
Homeowners and renters insurance does not cover flooding. So to protect against flooding, homeowners and renters must take out a separate flood insurance policy. Most flood insurance policies are purchased from private insurers through the National Flood Insurance Program (NFIP), which is managed by the Federal Emergency Management Administration (FEMA).
How much is it?
To reflect an individual property’s flood risk, NFIP premiums take into account many factors. These factors include the different types of flooding that could affect a property, the distance a property is from a source of flooding (like the coast or a river), and the cost to rebuild or repair that property. Based on these factors, average annual costs for flood insurance vary widely — as of August 2023, they ranged from several hundred dollars to thousands of dollars.
A policyholder’s annual flood insurance premium may change from year to year, as part of a gradual process to make premium rates reflect accurate flood risk. Current law limits rate increases to no more than 18% per year for most homes.
Who needs flood insurance?
Per federal law, properties with federally backed mortgages in high-risk flood areas must be protected by flood insurance. A property is in a high-risk flood area, called a Special Flood Hazard Area, if it falls into a 100-year floodplain — meaning the property has a 1% or greater chance of annual flooding, or a 25% chance of flooding over a 30-year mortgage.
To see whether a property lies in an area that triggers the mandatory purchase requirement, visit FEMA’s Flood Map Service Center.
Why don’t more people have flood insurance?
Aside from cost, another reason so few homeowners have flood insurance is because their properties are outside of Special Flood Hazard Areas and, therefore, they are not required to have flood insurance. This can give homeowners outside of these zones a false sense of security.
But just because a property is outside of a designated area doesn’t mean it has zero risk. In fact, so-called “high-risk” areas are determined by federal flood maps, which are often inaccurate and outdated. Many current federal flood maps do not accurately capture flood risk, as maps are outdated, fail to incorporate sea level rise, and don’t capture risks from extreme rainfall and riverine flooding — today or into the future.
Because of this, federal flood maps significantly underestimate the number of people living in areas of high flood risk, resulting in incomplete flood insurance coverage across the United States. As we’ve seen with recent storms, these inaccuracies can have devastating consequences for individuals and communities: According to a Washington Post analysis, just 2% of properties in western North Carolina counties affected by Helene fell inside high-risk flood areas.
Why you should have flood insurance
As flooding becomes increasingly frequent and costly, flood insurance is a good idea — even if you’re not in a federally defined high-risk flood area.
Though other recovery resources exist, like FEMA’s Individual Assistance program or Small Business Administration loans, they pale in comparison to the payout from flood insurance: NFIP policies cover up to $350,000 for a building and its contents, while the maximum payout for the FEMA Individuals and Households Program is $36,000.
To take one example: After Hurricane Ian hit Florida in 2022, the average NFIP payout was nearly $100,000; the average Individual Assistance payout was around $3,000.
How Congress can improve flood insurance
FEMA has taken steps to update how it prices flood insurance to be more accurate, fair, and transparent. But flood insurance is still unaffordable, if not entirely out of financial reach, for too many people.
That’s why Congress should create an affordability program. Such a program, based on someone’s ability to pay for coverage, would provide targeted assistance to homeowners and renters who need it most. Expanding access to flood insurance will not only help more people have financial security against flooding; it’s also a better deal for taxpayers across the board because it reduces costly post-disaster spending.
In addition to flood insurance being too expensive, many people may simply be unaware that their property is at risk of flooding. As flooding increases in frequency and severity, every household deserves to know their flood risk and have the option to purchase flood insurance.
Increasing that awareness starts with updating inaccurate and outdated federal flood maps to reflect the best available science and incorporate data on future conditions, such as rainfall data from the National Oceanic and Atmospheric Administration.
Flood insurance provides peace of mind
Floods are financially devastating, destroying homes people worked hard and saved for years to buy in a matter of hours. With accessible and affordable flood insurance, as well as an accurate understanding of one’s risk, people have peace of mind that they will have resources to recover from a disaster.
—
Credit for photo at top: John Coletti/Getty Images.
