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Why Do So Many Homeowners Lack Flood Insurance?

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Why Do So Many Homeowners Lack Flood Insurance?

By: Adam M. Matheny

Most people equate flooding with living near lakes, rivers, and streams, but as residents of cities like New Orleans, Baton Rouge, and many other coastal towns can tell you, it can happen just about anywhere there is a body of water.

With the risks of flooding coming to the forefront over the last few years, it begs the questions, “Why is it that so many people living in the U.S. fail to purchase flood insurance?” and “Do those who do not have flood insurance truly believe they are immune from the water’s ravages?”

Insurance Agents Have Their Say

According to a recent survey conducted by the Private Risk Management Association (PRMA) that asked the question, “Why don’t your customers buy flood?”

The results of the survey were overwhelming. No matter the value of the property the answers were very similar, “I don’t buy flood insurance because it won’t happen to me.” Most people see flood insurance as something that only those living in “flood zones” are required to buy. Few see it as something designed to protect their investment. Very few people who live in areas that are not considered “high-risk” will shell out for flood insurance.

People in this category fail to realize that flooding can occur near rivers, lakes, ponds, streams, even low-lying areas where water can collect during heavy rains or snow run-off. When this happens, and there is no coverage, the homeowner could end up being responsible for all damages not covered under their standard homeowner’s insurance policy.

More Than Waiting for It to Happen

Along with understanding more about flood insurance and the need for it, people also need to be aware of the steps they can take to minimize or even eliminate the risk of flooding. These include sandbags, landscape modifications, and inflatable water barriers and more.

Under the current NFIP (National Flood Insurance Program) and ISO Personal Flood Policy both offer up to $1,000 to help homeowners take the necessary preventative steps to protect their homes. Most homeowners aren’t even aware of these provisions to help mitigate flood damage.

What About Private Flood Insurance?

With the current issues surrounding the NFIP program, many insurance carriers have started offering flood insurance policies that provide significantly more coverage. The ISO has created both a Personal and Commercial Flood Program. With the increased availability of coverage, it is up to carriers to educate their agents and then for the carriers and the agents to inform the public.

Making use of modern technology and analytics has allowed new maps to be drawn to replace those that are tragically out of date. The new maps include information on rainfall, hurricanes, changes in elevation and topography, wind, and storm surges.

While it is true that flood insurance is expensive in some areas, those living in a “low” risk area may find it costs far less than they thought. Along with this, builders continue to resist changes in building codes that would require them to build homes and landscape yards in ways that would protect the houses from flood damage. The simple fact is that people feel that if the city or county zoned the area for home, it must be safe to build a house here.

About That One-Hundred-Year Flood Thing

Far too many people operate under the impression that if they live in a 100-year flood zone, it only floods every hundred years or so. Unfortunately, what it really means is that each year there is a 1% chance of a significant flood occurring. Which instead of meaning there is little risk, instead indicates there is a substantial risk of flooding. But while you may or may not have to worry about the “Big One” happening, many other storms can come along and cause flooding.

Risk Percentage Chart

Time Period    10 Yr.  25 Yr.  50 Yr.  100 Yr.    Total Odds

1 yr.                 10%     4%       2%       1%           17%

10 yr.               65%     34%     18%     10%         127%

20 yr.               88%     56%     33%     18%        195%

30 yr.               96%     71%     45%     26%         238%

50 yr.               99%     87%     64%     39%         289%

Source FC&S Online

Down to the Nitty Gritty

One of the most significant issues is trying to figure out how best to educate both the insurance industry and the public on the various flood mitigation techniques that can help save their homes from severe damage and that flood insurance is available. Both agents and brokers need to have the proper training to serve their clients best.

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