Flood Damage – A Rising Problem
By Sue C. Quimby, CPCU, AU, CIC, CPIW, DAE, CLP-A – Senior Vice President
According to climate.gov, 2023 brought record climate and weather-related disasters to the United States. In all, 28 such events each caused at least $1 billion in damage, with the total exceeding $92.9 billion. Results for 2024 will be even more severe, with estimated losses from Hurricanes Helene and Milton reaching $50 billion each. This is in addition to the 20 climate-related events that exceeded $1 billion each during the period ending September 10, 2024. While the federal government may step in, in many cases the home or business owner must rely on insurance or assets to recover from such damage. Helping clients manage disaster risks, including flooding, is another value-added service of the professional insurance agent.
The number one natural disaster in the United States has long been flooding (fema.gov). It does not take much time or water to cause a major problem. Just two feet of surface water can carry a car. In a flash flood, there may be a wall of water 10 – 15 feet high. As was seen in the eastern United States after Helene and Milton, many homes and businesses suffered tremendous damage due to the sheer volume of rainfall. More than 40 inches was estimated to have fallen in rural parts of North Carolina. Storm surges exceeded 15 feet – as high as a two story house in some areas.
Only about 15% of homeowners carry flood insurance. Many people think that because they are not in a flood hazard zone, they are not at risk of flooding. However, anyone can experience a flood. Every state has been impacted – either from flooding or flash flooding – in the past few years. Pewtrusts.org advises that there is a flood somewhere in the United States virtually every day. Areas that previously have not had flooding may become susceptible to flooding due to changes from construction and development that alters water runoff patterns. Melting snow, winter storms and hurricanes are other sources of flooding. Climate change and new weather patterns have also been cited as causes. Wildfires impact flooding, as they destroy vegetation that would normally absorb the water. Proper land grading and drainage can reduce the flooding.
The Federal Emergency Management Administration (FEMA) provides direct financial and other assistance to individuals and businesses with disaster-related expenses that are either uninsured or underinsured. This includes floods, hurricanes and wildfires. Assistance ranges from temporary housing to help with home repairs or medical and funeral expenses. One third of FEMA’s flood relief assistance goes to people outside of designated flood hazard zones as long as the event is a declared federal disaster. Localized flooding would usually not trigger assistance from FEMA. In those instances, property owners must look to specialty insurance coverage, or rely on their own assets to recover from the damage.
Flooding is excluded in standard homeowners and commercial policies. While some policies do offer coverage for back up of sewers, drains and sump pump overflow, the coverage is often limited to $5,000 or $10,000. Sump pump overflow coverage does not apply if the sump pump is not actually installed and operational. Even with one or more operating sump pumps in a structure, as during Hurricane Ida, there can be too much water and sump pumps may be overwhelmed or fail. If water reaches appliances, including water heater and furnace, they probably need to be replaced. In such instances, gas and/or electricity should be turned off until the systems can be inspected.
Flood insurance pays for damages even if there is no federal disaster declaration. In 2023, FEMA reported the average cost of flood insurance was $800-888 with the average claim payout being $69,000. This payout varies depending on the number and severity of flood events.
Initially, flood insurance was only available through the federal government under the National Flood Insurance Program. The Write Your Own Program, begun in 1983, allows private insurers to write and administer the Standard Flood Insurance Program. Companies receive a fee, while the federal government retains the responsibility for paying any underwriting losses.
Disasters can occur at any time. In the case of flooding, specialty insurance coverage is available to help pay for losses. Even though flood represents the largest cause of loss, and insurance is readily available, 85% of Americans do not purchase flood insurance. Helping clients understand the risks of flooding and the ways to reduce flood loss, is another sign of the true insurance professional.
This article is for educational and discussion purposes only and it is not insurance or legal advice and should not be relied upon when making insurance or legal decisions. Nothing herein shall be construed to constitute a legal or underwriting opinion. Nothing herein shall be construed as offering any political, social, or public policy opinion by the author or MSO. Neither the author nor MSO are responsible for errors in, or the accuracy or currentness of, the article.
