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September 18, 2017

Disaster Recovery 411: Should You Have Flood Insurance?

It’s been an especially destructive hurricane season. Harvey made landfall on the Texas coast as a Category 4 hurricane before stalling over Houston, where it caused extreme flooding. Hurricane Irma followed, devastating the Caribbean before hitting Florida. While people were still dealing Irma, Jose developed into another Category 4 hurricane in the Atlantic.

If you’re a homeowner with property destruction, you’re probably wondering how to pay for repairs. Even if you don’t live in an affected area, these storms raise the question … what does homeowners insurance cover when disasters strike?

Homeowners insurance doesn’t cover damage from floods.

Homeowners insurance protects homeowners from many risks. Policy details vary, but in general, it pays for both damage to the property structure and the contents inside for covered causes of loss – up to the policy limits. When a hurricane or other storm hits, some policies cover wind damage. Homeowners insurance does not, however, cover floods. For this, homeowners need flood insurance.

Many homeowners don’t have flood insurance.

To protect the value of their property, and to avoid taking out loans to rebuild after a disaster, homeowners need the right insurance policies. The Consumer Federation of America (CFA) estimates that 50,000 claims could be filed for wind damage due to Hurricane Harvey alone, while the number of claims for flood damage may be as high as 150,000.

Insurance payouts are not expected to be as high as they were after Hurricane Katrina, but this is not because the damage is expected to be significantly less – it’s because so few people have flood insurance in the areas affected by Hurricane Harvey. The CFA estimates less than 20 percent of people in the area have flood insurance. A lack of flood insurance is also an issue in Florida, where Hurricane Irma struck.

Federal aid is not enough.

FEMA runs the Individual and Households Program (IHP) to provide aid after a disaster. However, homeowners counting on the grants to cover the cost of rebuilding may be in for a huge disappointment. The aid is designed to help return property to a safe condition. It is meant to be supplemental, not to cover all the expenses involved in rebuilding a house or in replacing all the items inside. 

Additional disaster aid is available in the form of loans. Homeowners can get up to $200,000 to rebuild their home, and homeowners and renters can get up to $40,000 to replace personal property. These are loans, however – they have to be repaid.

For many, even in California, flood insurance is an essential protection.

The National Flood Insurance Program provides federally backed flood insurance to people even in high-risk areas. Under the program, homeowners can purchase coverage of up to $250,000 for their house and up to $100,000 for their belongings. Most people pay around $700 per year.  Renters can also buy flood insurance to cover their belongings.

Even in the dry state of California, floods can occur – particularly after wet weather patterns such as those caused by El Nino. That said, some question if flood insurance is a good investment for Californians since history illustrates that payouts have been much less than premiums paid. For this reason, the state is exploring options for creating a state-run flood program.

If you’re wondering if you should have flood insurance, talk to your Heffernan Insurance agent. Having the right insurance can’t prevent a disaster from striking, but it can make the road to recovery much easier. 

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