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The true cost of dropping flood insurance

Posted on Sep 26, 2017 by: Scott West

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The financial toll of Harvey and Irma is enormous, and thousands of uninsured dwellings will only exacerbate the staggering cost.


The FEMA program that offers Americans flood insurance began 2017 with a $25 billion deficit. It’s estimated that Harvey and Irma will add roughly $20 billion more to that deficit. The NFIP currently has 4.9 million policies on the books, which is less than 5.4 million in 2012; people dropped out after rate increases designed to pay for the Katrina deficit and encourage the private insurance market to begin writing coverage. 

Over the last three years, many formerly-insured households have dropped flood insurance to cut household expenses (which is an option in the absence of a federally-backed mortgage), so lots of folks wound up being uninsured for a storm that dropped nearly fifty inches over three days in southeast Texas—an unprecedented event that put chest-high water in neighborhoods that haven't flooded in living memory.

In the Houston area, the two flood-control reservoirs on the west side of town did their job, holding back the initial onslaught of runoff on Saturday, Sunday, and early Monday. Then both reservoirs hit capacity and the Army Corps of Engineers was forced to initiate major releases, which inundated neighborhoods and major roads alike. For nine days after the releases, anyone traveling down I-10 could expect near-standstill traffic (on otherwise well-flowing routes) at most times of the day.

Meanwhile, people driven from their homes had to wait for the waters to recede. The NFIP policy pays a maximum of $250,000 on a dwelling with a separate, lower limit on contents. If you had flood coverage, it’s some consolation (but not much); unfortunately, a lot of folks did not. The NFIP and taxpayers could've paid out a lot more if everyone was covered.

Anyone in a coastal regiona, regardless of flooding history, needs flood coverage. More dollars going into the FEMA program will help decrease the deficit in non-flood years, and more flood-insured homes would make for a faster and less painful recovery. But as with all weather-related or catastrophic events, people are inclined to believe that if they didn’t get hit this time, they never will.

Don’t take a chance with "next time." Buy flood insurance; you will be helping yourself, your community, and your country recover faster. 

For those who didn’t purchase flood insurance, there are options for disaster relief:

  1. FEMA will assist you with temporary housing, emergency home repairs, uninsured and underinsured contents losses, and in some cases, medical expenses.

  2. You can apply for assistance online at www.DisasterAssistance.gov or call 800-621-3362 from 7:00 AM to 10:00 PM.

  3. Temporary housing assistance is available to anyone, but aid for contents losses, moving and storage expense, etc. is income-dependent.

  4. FEMA grants are designed to assist those without flood insurance, but as a general rule will not pay to return a home to its pre-flood condition. The Small Business Administration does have a program designed to provide loans for disaster recovery, which may fully restore a home or business not insured for flooding.