Storms draw more attention to flood protection
Recent storms in the United States have, again, brought flood insurance into the limelight. In South Carolina, many homeowners and businesses are reeling from the impact of Hurricane Joaquin, which has lead to loss of life and major property damage in the state. Almost three years ago, Hurricane Sandy hit the country as well, causing major damage in New York and New Jersey and becoming one of the most disastrous natural catastrophes that the country had ever seen. Both of these powerful storms caused significant flood damage, which consumers quickly discovered was not covered by their homeowners insurance policies.
Federal program offers coverage, but many consumers are unaware of its value
Typically, the only place for property owners to find flood protection is from the National Flood Insurance Program, which is managed by the Federal Emergency Management Agency. There are very few private companies that offer flood protection in the country, largely due to the risks that they face and the existence of the federal program offering coverage to homeowners. Awareness of flood insurance is quite low, however, with many homeowners lacking this form of coverage, believing instead that their homeowners insurance policies will cover damage caused by flooding. Most of these policies do cover wind-driven rain damage, but not the damage caused by rising waters.
On average, flood insurance premiums are approximately $700 annually, though properties located in risk-prone areas can see premiums much higher than this. Rates have also been affected by Hurricane Katrina and Hurricane Sandy, which caused massive losses for the National Flood Insurance Program, which it has struggled to recover from. Premiums for flood protection rose in April of this year, with those in flood-prone areas seeing hikes as high as 25%. In some states, surcharges are being applied to most policies, especially for those covering second homes.
There are provisions of typically homeowners insurance policies that can cover damage that may be related to flooding. For instance, if a flood causes a tree to fall on a property, the damage caused by this event would be covered. Flood insurance is not, however, a perfect solution, as federal coverage does not offer temporary living expenses and these policies do not cover damage caused to exterior properties, such as decks and patios.
