Spotlight On Feature for March 2022 – Do I Need Flood Insurance?

Flood Insurance:

According to an article published by Reuters in February 2022, extreme weather combined with rising sea levels could cause $20,000,000,000 in damage to US homes this year, rising to $32,000,000,000 by 2051. This is according to research conducted by the New York-based non-profit flood research firm, First Street Foundation*.

The cost of flood damage was approximately $17 billion annually between 2010 and 2018, according to testimony from FEMA representative Michael Grimm. This trend continues to escalate the need for increased awareness and preparation for future flood events that are not that far into the future. The 2021 Atlantic hurricane season ended with eight storms smacking the US coast and a total of 21 named storms for the season, the third most active year in history, according to the National Hurricane Center.

There are several key strategies to consider as the US heads into what many industry experts consider to be an elongated hurricane season – a time when flooding risks are increased during major storms.

The first step is gaining an understanding of the potential exposures to the peril of flood. Your home doesn’t have to be situated close to a body of water in order to suffer damage from flood waters. Many homes in areas considered to be “low risk” for flooding, experience flood events and flood losses for which their owners are often unprepared. Mortgage companies don’t require flood insurance in “low & moderate risk” flood zones, so many people don’t buy it. Unfortunately, 20% of all flood claims filed were for homes located in low to moderate flood zones. When you consider the fact that many homeowners don’t buy flood insurance unless their mortgage company requires it, that 20% number is exceptionally high. If the low to moderate-risk zone homeowners often don’t buy the insurance, the real impact of flood damage for the un-insured is significantly higher than the 20% of reported claims.

Hurricanes, like hurricane IDA in 2021, often cause as much if not more serious damage and kill more people living in inland homes as they do coastal properties. When IDA hit the Louisiana coast there were 26 deaths attributed to the storm, whereas the storm tracking northeast was responsible for extensive property damage and at least 50 people perished as a direct result of that one event.

Getting out of the path of the storm and retreating to a safer area is a way to protect yourself and your family, but what about the property you may have to leave behind?

Raising the elevation of your home and installing hurricane shutters or stronger window glass are some ways to lessen the impact of a major storm, but those risk mitigation strategies are very expensive and in many cases impractical for most homeowners. The most effective and efficient way to prepare for a future flood event is to purchase flood insurance.

In next month’s Spotlight On feature, we will share some of the things to consider when shopping for the right flood insurance for your home. The National Flood Insurance Program (NFIP) managed by FEMA is one option, but there are others to consider as the peril of flood becomes a more important piece of your personal risk management strategy.

*First Street Foundation is non-profit 501©(3) research and technology group whose mission is to make climate risk data accessible and actionable for individuals and governments.