by Mike Colpitts 
The Brief
- Flood insurance limited to 6 percent of U.S. households.
- The Insurance Information Institue says flood insurance is the most under-insured category in the insurance industry.
- Flooding is more widespread than at any other time in U.S. history and climatologists expect it to only increase in coming years with climate change.
Flood insurance policies are limited to just 6% of U.S. households, despite the fact that it’s needed in millions of other homes.
When a disaster hits it’s a surprise to many homeowners what’s not covered. Standard homeowner insurance policies cover fire damage, burglary losses and in some cases flooding from a washing machine flooding the inside of a home.
But flooding from a storm isn’t covered without a separate flood insurance policy. Most homeowners who have flood insurance are required to have it by their banks. The Federal Emergency Management Agency determines flood zones. The National Flood Insurance Program run by FEMA is the primary provider of flood insurance.
Flood Insurance Limited
Mark Friedlander, a spokesman for the Insurance Information Institute, said only about 6% of U.S. households have a flood policy, most of which are in the coastal areas prone to hurricanes. That rate has remained steady for years despite the increasing frequency of severe flooding, which includes areas that are not formally considered by the government to be high risk.
“Lack of flood coverage is the largest insurance gap across the country,” Friedlander said. “Ninety percent of U.S. natural disasters involve flooding and flooding can occur just about anywhere it rains.”
Congress created the program more than 50 years ago when private insurers stopped covering homes that were in high risk zones. These days more homes need flood coverage than ever before with climate change impacting a growing inventory of homes, but only 6% of homes in the U.S. have it.
Flood Insurance in US
FEMA’s Flood Map Service Center has an online tool to check to see if your home is in a flood zone. FEMA says that a 1% chance of flooding is considered high risk because it amounts to a 1-in-4 chance of flooding over the life of a 30-year mortgage.
Many homeowners in high-risk zones who should have flood insurance don’t have it because of its expense. But choosing a less expensive option can be the worst decision in the case of a disaster. The cost of opting for a cheaper insurance policy can be the difference between having a home to live in or going bankrupt.
Hurricanes are part of Florida’s long history. Global warming has increased the intensity of storms and turned many hurricanes into Super Storms that have the power to do increasingly catastrophic damage.
Major storms cause water damage that devastate homes and businesses every year. Climate change has been predicted for decades by climatologists, who have forecast warming conditions. Natural disasters are an increasingly vital part of society and are forecast to worsen over coming decades, making it that much more important to have the proper insurance coverages in place.
Flood Coverage Limited
Even if a homeowner does have flood insurance, the coverage may not be enough to make a policyholder whole again.
FEMA’s National Flood Insurance Program only covers up to $250,000 for single-family homes and $100,000 for contents. Renters can get up to $100,000 for contents, and commercial flood insurance will cover up to $500,000.
Flood coverage limits are not robust, especially at a time when climate change is making strong hurricanes even stronger and making storms produce more rainfall. However, privately backed insurance policies are available in some markets.