Insured against floods? It’s wise
Even in low-risk zones, properties are vulnerable
Have you changed your mind about flood insurance?
Experts say the Hurricane Harvey catastrophe in Houston and elsewhere in Texas proves that everyone who owns a home or business is vulnerable.
Their advice: Forget the maps produced by the Federal Emergency Management Agency separating properties from “high-risk” mandatory-insurance flood zones and “low-risk” optional-insurance zones.
Regardless of where you live, if you own a home and don’t have flood insurance, you are leaving yourself open to overnight financial ruin.
At least 80 percent of homeowners — four of every five — in the eight Texas counties hit hardest by
flooding have no flood insurance, a Washington Post analysis concluded. A big reason is many of the homes that flooded were in lowrisk flood zones, and unlike homeowners in high-risk zones with federally backed mortgages, their owners were not required to buy flood insurance.
In other words, those owners rolled the dice and lost. Similar percentages of Floridians are gambling such a large rain event won’t happen here, the Post study said.
“The scope of the tragedy in Houston is going to be mind-numbing,” said Paresh Patel, chairman and CEO of Tampa-based HCI Group, parent company of Homeowners Choice Property & Casualty, one of Florida’s five publicly held property insurers.
Ask residents of Lee County, on Florida’s southwest coast, if flood insurance is unnecessary.
For nearly a week, that area has been deluged with 20 inches of rain, flooding dozens of homes. “If Harvey hadn’t happened, Southwest Florida would have been the headline,” said Chris Heidrick, owner of Heidrick and Co. Insurance in Sanibel.
Homeowners facing heavy losses without insurance have few choices: Liquidate savings, if they have them, to make the fixes. Borrow the money. Get their home safe enough to live in, if possible, and make incremental improvements over time. Or walk away from the investment and let the bank foreclose.
FEMA emergency assistance grants are rarely enough to bring flooded homes back to pre-flood condition. The maximum post-disaster grant is $33,300, but the average paid to individuals or households is $4,000 to $6,000. That’s intended to cover temporary housing, lodging reimbursement, child-care expenses, vehicle repairs, funeral assistance, medical and dental care caused by the disaster, and just enough repairs to bring a home into “a safe and sanitary living or functioning condition,” according to a FEMA fact sheet.
FEMA’s disaster grant program “is not a substitute for insurance and cannot compensate for all losses caused by a disaster,” the fact sheet says.
Houston-area homeowners in low-risk flood zones could have protected their investments with insurance costing about $400 a year, Heidrick said. “To not spend $400 a year and put yourself in a spot where you could lose everything to me is penny wise and pound foolish.”
Patel said, “We have to look at the whole state [of Florida] as a high-risk flood zone. If you have water in your house, most people are not financially able to recover from that loss.”
The National Flood Insurance Program paid $2.4 billion to settle 26,949 claims after severe storms and flooding in Baton Rouge, La., in August 2016. That’s an average of $89,325 per claim.
“Leaving aside which zone you’re in or whether the government makes you buy insurance, can you afford $89,000 to fix your home?” Patel said.
Even Hurricane Matthew, considered manageable by insurance standards, resulted in 16,193 claims with an average payout of $38,217.
Florida has the most flood insurance policies — 1.7 million — of any state in the nation. But that’s a fraction of the 4.7 million singlefamily homes here.
Plus, Florida property owners are flood-insurance scofflaws.
Of 702,758 structures under a mandatory purchase requirement, just 57.4 percent had flood insurance in 2015, according to FEMA data.
One reason is flood insurance in high-risk zones — classified on FEMA flood hazard maps with the letters “A” or “V” — can cost hundreds, even thousands, of dollars more than the preferred-risk policies in lowrisk zones. But even with the higher rates, the federal government encourages coverage by providing deep discounts. That’s a point of contention as Congress this month debates how best to restructure the program so it doesn’t continue to accrue billions of dollars of debt.
In Florida, most floods don’t reach heights seen in Houston after Harvey. Drainage is faster for a number of reasons, including a complex system of manmade waterways and retention ponds, proximity to the coast, and the state’s porous sand and limestone base.
But damaging flooding will happen in any region subjected to 52 inches of rain, including 20 inches over 24 hours.
Even two to three inches throughout your house will cause thousands of dollars in damage, Patel said. Carpeting, wood or travertine flooring would most likely be ruined. Say goodbye to that new smart refrigerator with a circuit board at the bottom, he said.
And your walls? The sheet rock acts like a sponge, absorbing water far above the two to three inches covering the floor.
Repair crews come in and “cut all the drywall five feet up the wall,” Patel said. “If you don’t take it out and apply herbicide to the wood studs, you’re going to get mildew and mold in a couple years.”
Why are so many homeowners willing to forgo flood insurance?
If their properties are outside mandatory flood insurance zones and in lowrisk zones, classified on the maps by FEMA as “B,” “C,” or “X” zones, homeowners think, “I must be safe,” Patel said. “When we tell a portion of homeowners, ‘You must buy flood insurance,’ it’s made everyone else think they are safe.”
Heidrick said the lowrisk classification “causes people to think the odds are in their favor that ‘it’ll never flood here.’ That doesn’t mean you’re safe. It just means you’re less likely to experience flooding.”
And even after extreme flooding events caused by Hurricane Katrina in 2005, Sandy in 2012 and Baton Rouge, La., in 2016, too many people don’t understand that regular homeowner insurance does not cover damage from water that seeps in from the outside, Patel said.
He said a simple way to understand coverage is, “Your homeowner policy covers water coming from inside the house [such as from a broken pipe or appliance] or coming down [such as a roof leak]. It does not cover water coming up.”
Patel said images from Houston have prompted more Florida homeowners to sign up for insurance through his company’s online flood insurance portal, TypTap.com. As of Wednesday, he said 60 policies were sold — a record week for TypTap, he said. “People are suddenly paying attention.”
Ryan Papy, president of Miami-based Tom Gallagher Insurance and Keyes Insurance in Pompano Beach, said agents at his firm sold as many flood policies during the first two days of the week as they usually do in a month.
That’s normal after large flood catastrophes draw national attention, said Lynne McChristian, Florida spokeswoman for the Insurance Information Institute.
“Nothing sells flood insurance like a big flood,” she said. “But the fact is, people let policies lapse and that’s indicative of short-term memories. We as humans fail to recognize the risk is always there.”