When Hurricane Harvey stalled over Houston in late August, it dumped more than 50 inches of rain on the city and put entire neighborhoods underwater. Texas Gov. Greg Abbott estimates the damage will cost $150 to $180 billion, and many residents may find they are on the hook for repairs to their houses. According to an analysis by The Washington Post, only 17 percent of homeowners in the hardest hit areas have flood insurance.
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“It’s one of those things where people think: I’m not susceptible to a flood,” says Fran O’Brien, division president of Chubb Personal Risk Services. They may think since they sit on a hill or are located relatively far from a coastline or a river that they won’t be affected by rising waters.
Alternatively, some people erroneously believe their homeowners insurance will pay for damage due to flooding. While some companies provide coverage for events such as sewer backups, payment for damage from rising flood waters requires a separate policy.
Risk extends past the floodplain. When it comes to who needs to buy flood insurance, the answer is easy for those who live in high-risk areas and have a mortgage. In those cases, a lender may require coverage.
For everyone else, it’s not as clear. “That’s actually a very complex question: Who’s at risk?” says Kate Stillwell, founder and CEO of Jumpstart Insurance Solutions. “The biggest misconception is that floods can only happen in a mapped zone.”
Many Houston residents have discovered the hard way that being in a low-risk area is no guarantee of avoiding flood damage. An analysis from the University of California-Davis Center for Watershed Sciences estimates 53 percent of the flooding from Hurricane Harvey occurred in areas deemed to have a minimal flood hazard.
“Everyone talks about a 100-year floodplain or a 500-year floodplain,” says Mark Welstead, president of Rainbow International, a Neighborly Company that provides flood restoration services. “One of the challenges is if you’re close by but not in the floodplain, you’re still at risk.”
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Multiple flood insurance coverage options. Experts say there is no easy way to determine if a homeowner should buy flood insurance. In addition to their location in proximity to waterways, people should consider whether their basement is finished and what other resources they might have to respond to a flooding event.
Those who do decide to buy flood insurance have several options. The National Flood Insurance Program underwrites much of the flood insurance in the country. However, that program is set to expire on Sept. 30, 2017 unless Congress reauthorizes it.
Welstead cautions people not to confuse NFIP coverage with disaster relief provided through the Federal Emergency Management Agency. “The reality is FEMA might give you some assistance, but that might not cover your structure or contents,” he says. Instead, homeowners need to buy a NFIP policy – available through participating insurance agents – to get money from the flood insurance program.
Still, even those who buy NFIP policies could find themselves paying out of pocket to replace a home after a flood. Flood insurance from the government will only cover up to $250,000 for damages to a residential dwelling and $100,000 for personal property lost in a flood. Coverage for contents is not automatic and is offered for a separate premium.
O’Brien says homeowners may need to use a combination of NFIP and private flood insurance to fully insure their property. While NFIP policies won’t pay for temporary housing or cover loss of income, those may be options with private policies. Other plans may offer only supplemental coverage. Stillwater notes Jumpstart Recovery Solutions will soon offer flood plans intended to cover short-term out-of-pocket costs.
To make sure homeowners get the right type and level of coverage, O’Brien strongly recommends working with a trusted insurance agent or broker. “It’s very, very important that you get good advice,” she says
Don’t wait until the weather turns bad. Like other forms of insurance, flood coverage must be purchased in advance. NFIP and most private policies have a 30-day exclusion period before coverage begins. “If you have a tropical storm bearing down on your address, it’s too late,” Welstead says.
Not only do homeowners need to make sure they have a plan in place, they need to ensure they have the proper level of coverage. “The worst time to find out you’re underinsured is when an event happens,” O’Brien says.
In addition to buying insurance, homeowners should inspect sump pumps annually and consider landscaping features that will divert water from a home. Beyond taking those precautions, the only other thing left to do is hope the next record-setting storm doesn’t hit close to home.