Recent natural disasters have exposed how few Americans have flood insurance – with experts now warning of the potentially devastating impact this could have.
Large parts of the southeastern US have been hit by deadly hurricanes in recent weeks. The hardest-hit areas in North Carolina are dealing with the ruins left behind by Hurricane Helene, which destroyed homes and caused widespread flooding late last month.
And in the immediate aftermath of Hurricane Milton’s devastating path through southwest Florida, residents are now surveying the wreckage.
The full extent of the damage caused by Milton remains to be seen. But these catastrophic weather events have exposed an alarming gap in coverage for millions of Americans – which could make the road to recovery even more difficult for the communities ravaged by these storms.
Flood insurance is not included in homeowners insurance and must be purchased separately, which many Americans did not realize.
Recent natural disasters have highlighted how few Americans have flood insurance, and the potentially devastating impact it can have (Photo: Floodwaters left over from Hurricane Helene in Swannanoa, North Carolina)
“We have a failed system to protect people from flood damage,” Douglas Heller, insurance director at the Consumer Federation of America, told DailyMail.com.
Flood insurance is largely provided by the federal government through the National Flood Insurance Program (NFIP), or through a handful of private insurers.
In some areas, including parts of Florida, flood insurance is required for government-backed mortgages for homes classified as high risk by the Federal Emergency Management Agency (FEMA).
Some banks also require the coverage to make a home loan in vulnerable areas identified on the agency’s traditional flood maps.
Yet, according to FEMA, only a staggering 4 percent of homeowners nationwide have flood insurance.
In western North Carolina, where some areas were drowned by flooding from Hurricane Helene, it is estimated that less than 1 percent of homes have coverage.
“What’s happening will continue to expose the problem of the large number of uninsured homes, especially in North Carolina,” Heller said.
Florida also sees a lot of damage caused by wind and rain, he said, meaning some damage could be covered by home insurance.
“I fear there will be many homes in North Carolina where insurance companies will vehemently deny the claim that the damage was caused by rain or wind, and will instead say that the damage was all caused by flooding. and saying they don’t cover flooding in home insurance,” he said.
According to FEMA, just one inch of flood water can cause up to $25,000 in damage to a home.
A person cycles through the water left after Hurricane Helene on October 4, 2024 in Swannanoa, North Carolina
A first responder in the water outside a flooded apartment complex after Hurricane Milton on October 10, 2024 in Clearwater, Florida
“We have a failed system to protect people from flood damage,” Douglas Heller, insurance director at the Consumer Federation of America, told DailyMail.com
There are many reasons why so many homes forego this crucial coverage.
The first is simply that many Americans assume that flood coverage is included in their homeowner’s insurance policy.
Others may simply not understand the risk, Heller explained, or outdated flood maps may indicate they are not in a high-risk zone so they think they don’t need them.
And even in areas where flood insurance is required, some lenders may turn a blind eye, or some homeowners may drop coverage once their mortgage is paid off.
Another reason is that Americans bear all kinds of costs, Heller said, and they want to save money wherever they can.
Millions of Americans already live in uninsured homes. According to the latest 2021 data, 6.1 million homeowners were uninsured — a number that has likely skyrocketed since then.
In addition, insurers are increasingly raising prices and withdrawing completely from states, including Florida, as the cost of covering rising natural disasters rises.
“If people want to save money, they won’t buy extra insurance,” Heller says.
“We’ve actually advocated for all the different aspects of home insurance coverage to be brought into one single policy because that’s what people think they’re buying and that’s what they want.”
According to a federal government analysis, the average cost of federal flood insurance is $819 per year NerdWallet.
This is in addition to the average cost of homeowners insurance in the US, which Insurify projects will rise to $2,522 by the end of 2024.
In Florida, paying more than $10,000 a year for coverage is already the norm, and concerns about the financial stability of Citizens Property Insurance Corp., the state’s insurer of last resort, are mounting.
The severity of Hurricane Helene’s destruction likely caused between $20 billion and $30 billion in uninsured flooding, according to a data analytics firm. KernLogic.
It is the responsibility of the property owners to pay for these repairs.
Although the extent of the destruction is not yet known, Wells Fargo estimates that Hurricane Milton could cause losses totaling as much as $100 billion.
For those who do have flood insurance, it will largely be provided through the federal debt program, NFIP.
Moody’s estimates that the NIV will likely suffer losses of nearly $2 billion from Hurricane Helene alone.
Some lawmakers worry that Milton could push the program to the limits of what it can borrow from the Treasury Department, potentially forcing Congress to raise the borrowing cap or pursue some form of alternative financing. Politics reported.
The program has a current debt of $20.5 billion.
Destroyed and damaged buildings in the aftermath of Hurricane Helene’s flooding on October 8, 2024 in Bat Cave, North Carolina
A man clears debris at a gas station store in Lakewood Park, Florida, in the aftermath of Hurricane Milton
Allstate CEO Tom Wilson told CNBC on Friday that he believes the federal government must “step up” to help combat the growing insurance crisis in the US.
For Heller, the concern is simply how few Americans are actually protected.
“We have a public insurance program designed to serve Americans, and the vast majority of Americans don’t have the coverage,” he told DailyMail.com.
“One of the reasons I don’t think Congress has taken this up is because the insurance industry is eager to pass that specific risk on to the government and taxpayers, rather than finding a way to build it into the home insurance policy.” . ‘
There are so many people in the wake of these hurricanes who will not only have experienced the catastrophe of the weather, he said, but will also have to endure the disaster that follows when they realize there is no money to rebuild them.
“When there is a flood, a community can be devastated, and if that community doesn’t have the resources to rebuild, it’s not just a few people who are struggling,” he said.
“It even has a ripple effect on the people in the area who were not affected by the flood, as it can have an economic impact for years to come.”
If nothing changes, he fears we will continue to see these “dramatic and terrible” gaps in reporting.
“We cannot afford to simply continue with the same approach to flood insurance that we have taken for the past fifty years. It doesn’t work.’