In the Northeast residents without flood insurance may be in for a rude awakening

Hurricane IreneA major hurricane has not made landfall on U.S. soil since 2008, but Hurricane Irene has broken that period of peace. As the first real hurricane of a supposedly active season, Irene seems to be making up for lost time. The storm has already reached Category 3 and is expected to reach the Carolina’s by Thursday. The hurricane will continue moving north, making its way through Long Island, New York and other states. The coming storm has raised concerns regarding insurance coverage as many come to the dire realization that their coverage may be lacking.

Floods are tied to hurricanes like the earth is tied to the sun. While hurricanes produce a huge amount of wind-related damages, the most disastrous effects of the storms often come from flooding. Given that few hurricanes make it so far north as Irene is expected to reach, the prevalence of flood insurance is somewhat lacking. This problem is made worse by the fact that few private insurance companies are willing to write flood policies.

In the Northeast, flood insurance rates are high. A meager 30% of homeowners in areas designated as being high risk have flood insurance. The vast majority of those without such coverage will have to seek protection from FEMA, whose insurance policies can be far more expensive than those from private insurers.
As a federal agency, FEMA is free from the insurance regulations imposed on most companies in the U.S. Thus, the agency can price policies based on their own expectations of risk and will not have to justify their reasoning to regulators.

Hurricane Irene is expected to reach at least a Category 4 by the time it reaches the Carolinas, which will undoubtedly cause a significant amount of damage. For those without insurance, the event may be nothing short of crippling.

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