Insurance Quotes & Advice

A flurry of major storm systems over the past few weeks have caused widespread flooding along the swollen Mississippi river.  Although there was a slight lull in in storm activity late last week, the river remains dangerously high.

The severe flooding has already caused over a billion dollars in estimated damages with the figure expected to rise considerably after all the damage has been tallied.  Millions of acres of fertile farmland are underwater and the loss of all the crops are pushing up food prices further in the already inflationary commodities market.

Many families have lost everything by placing their trust in outdated levees certified by the Federal Emergency Management Agency.

After all, local officials had assured townspeople in 1999 that the levee was sturdy enough to withstand a historic flood, and FEMA had agreed. In fact, some relieved homeowners dropped their flood insurance, and others applied for permits to build new houses and businesses.

Then on Tuesday, the worst happened: The levee burst and Gulfport was submerged in 10 feet of water. Only 28 property owners were insured against the damage.

If a levee is certified as being strong enough to withstand a “100 year” flood, the area is not considered a flood plain and property owners are not required to purchase flood insurance in most cases.  A recent insurance survey estimated that only 17% of Americans have purchased flood insurance through the National Flood Insurance Program.

Those without flood coverage will have to rely on federal disaster relief assistance in order to help with the rebuilding costs.  However, unlike an insurance pay out, the federal aid comes in the form of interest free loans which will eventually need to be repaid.

Despite the fact that the government subsidizes flood insurance and that it is much cheaper than if it were offered by the private market, many Americans have yet to take advantage of the relatively low cost insurance.  A survey conducted by the Insurance Information Institute states that only a small percentage of homeowners have purchased flood insurance.

Record widespread flooding across the Midwest has once again highlighted the catastrophic damages that flooding can cause. Yet a survey conducted for the Insurance Information Institute (I.I.I.) reveals that only 17 percent of Americans have a flood insurance policy.

The proportion of Americans with a flood insurance policy is relatively unchanged from a year ago when 14 percent said they have flood insurance.

The Federal Emergency Management Agency, which runs the National Flood Insurance Program, made a concerted effort to inform homeowner’s of the dangers of flooding prior to the beginning of the hurricane season but met with little success.  As the Midwest flooding shows, one does not have to live along the coast to be susceptible to flooding.

One would think that after Hurricane Katrina, residents living in hurricane prone areas would be more likely to purchase flood insurance but that has not been the case.  If you want to put your fortunes into the fickle hands of a jury over the wind vs. water debate just be warned that insurers are quickly taking that out of the equation by cutting back on wind damage coverage.

Unless you pretty much live in the desert, flood insurance is definitely something every homeowner should look into.  Just because home values have been in decline in the past year doesn’t mean that cost of rebuilding is getting any cheaper, with inflation heating up it’s quite the opposite.

A number of insurers are cutting back on their wind coverage in states along the Gulf Coast.  Most recently, State Farm announced that it wouldn’t renew coverage for residents in Mississippi that live within 1,000 feet of the water.

Insurers are trying to reduce their potential liability in hurricane prone areas.  As the aftermath of Hurricane Katrina showed,  juries were more likely to side with homeowners in legal battles with insurers over the wind vs. water issue.

This leaves many residents in coastal regions with a gap in their coverage, as is the case with flood damage.  While the federal government offers flood insurance, the Senate resisted efforts to include wind damage coverage while voting to renew to National Flood Insurance Program that was set to expire on September 1st.

With many state regulators fighting attempts to raise already high rates in coastal states, insurance companies are finding it a losing proposition if a major storm hits.  If the private market coverage for wind damage dries up further, Congress may have to revisit the issue despite the increased cost it would place on the program.

Congress is already considering a nationalizing catastrophe reinsurance, which would help lower premiums for high risk residents but that would only shift the cost to the rest of the public.