With climate changing, get educated about flood insurance
Standard home policy excludes damage from flooding
IT’S CLEAR THE CLIMATE is changing. According to FEMA, the U.S. has experienced more severe flooding in the last decade (18 severe floods during 2010-2019) than during the prior three combined (15 severe floods during 1980-2009). Whether related to hurricanes, extreme rainfall, snowmelt, mudflows or other events, floods cause billions of dollars in losses nationwide each year.
New England homes don’t need to be in a flood zone to experience this disaster. However, a recent survey by Plymouth Rock Assurance revealed that 52 percent of homeowners are not concerned about flooding at their house and more than 80% do not even buy flood insurance. Surprisingly, this survey was conducted while Hurricane Ida’s rains caused major flooding and winds and left severe damage to areas outside of historical flood zones on the east coast – far from its landfall.
If floods are increasing in frequency, impact and geographic reach, why hasn’t New Englanders’ perception of the importance of flood insurance changed? Why do we resist being mapped into a FEMA flood zone rather than seek adequate coverage for the risk? By avoiding flood insurance, homeowners are betting that luck outlasts financial ruin.
At the root of it all – and quite frankly an issue that gets far too little attention – is an education gap on flood insurance. There is widespread confusion about what policies will cover damages caused by a flood. Nearly 65 percent of homeowners would turn to their home insurance carrier in the case of a flood.
The standard home insurance policy excludes flood damage. Only water damage caused by things like a broken pipe or water coming through the roof are covered. A separate flood insurance policy covers the structure and personal belgongings from flood related damage. It’s this separation of flood from other perils that has created confusion amongst homeowners.
For decades, there was little choice when it came to buying flood insurance. All policies were written by the National Flood Insurance Program (NFIP) which was created to supplement disaster aid – an effort that has historically fallen short of covering all property losses. By requiring anyone in a flood zone to buy NFIP policies, the cost could be used to incent local homeowners and governments to build effective flood controls. This “community rating” was never meant to cover all damage, but to create a way to drive resilient approaches to commercial and residential development.
Recognizing that the NFIP is an incentive plan and not pricing according to risk, private carriers have since entered the flood insurance marketplace, offering a second option that can be less expensive and provide more complete coverage than the limited NFIP offering.
Private or NFIP, there is still a large hill to climb to educate homeowners on the importance of flood insurance as nearly three out of four homeowners still do not have or are not sure if they have flood coverage.After 40 years of living and working in high risk and low risk flood areas – watching low risk areas flood as often as high risk areas – I have seen how floods can devastate communities and leave the inadequately covered homeless. As New England adapts to a changing climate, there is a rising need for better coverage that is easier to access – and the home insurance industry may be in the best position to prepare homeowners for the reality of rising waters by giving them a better option than being undereducated, underprepared, and ultimately underwater.
Bill Martin is president and CEO of Plymouth Rock Home Assurance Corporation.