Benefits of Flood Insurance vs. Disaster Assistance

At the 2018_FloodWarn_Training_Kingwood on May 2, Diane Cooper of FEMA pointed out several startling statistics about the Hurricane Harvey Flood and flood insurance.

According to the City of Houston, approximately 90,000 structures OUTSIDE of the 0.2% Risk Area (500-year flood plain) were impacted. Additionally, another 30,500 structures INSIDE the 1% risk area (100-year flood plain) and 29,000 in the 0.2% risk area flooded.

However, out of approximately 150,000 total homes flooded, only 26,511 insurance claims were filed. That’s because approximately only one in six Houstonians had flood insurance.

Most people felt that if they lived outside the 1% risk area, flood insurance was an expense they could do without. Yet four in every five flooded homes were outside the 1% risk area.

Let’s examine flood insurance vs. disaster assistance as hedge against such risk.

The following information came from the National Flood Insurance Program (NFIP) portion of the FEMA website.

Flood Insurance

Flood insurance has six primary benefits:

• You are in control. Flood insurance claims are paid even if a disaster is not declared by the President.
• More than 20 percent of NFIP claims from from outside of mapped Special Flood Hazard Areas.
• There is no payback requirement.
• Flood insurance policies are continuous, and are no non-renewable or canceled for repeat losses.
• Flood insurance reimburses you for all covered building losses up to $250,000 for residential occupancies and upon to $500,000 for businesses. Contents coverage is also available up to $100,000 for residential occupancies and up to $500,000 for businesses.
• The average cost of a flood insurance policy is about $600 annually. The cost of a preferred risk policy is less than $450 annually, if you live in a moderate-to-low-risk area.

Disaster Assistance

Compared to flood insurance, disaster assistance has several drawbacks.

• Most forms of Federal disaster assistance require a Presidential declaration.
• Federal disaster assistance declarations are not awarded in all flooding incidents.
• The most typical form of disaster assistance is a loan that must be repaid with interest.
• The duration of a small Business Administration (SBA) disaster home loan could extend to 30 years.
• The average Individuals and Households Program award for Presidential disaster declarations related to flooding in 2008 was less than $4,000.
• Repayment on a $50,000 SBA disaster home load is $240 a month or $2,880 annually at 4 percent interest.

The More You Know, the Better Flood Insurance Looks

Everyone should have flood insurance. Remember, not all flooding comes from rivers and streams. During Harvey, thousands of homes flooded from overflowing streets when storm drains and sewers backed up. Floods can happen anytime, anywhere…even in deserts.

Homeowners insurance policies typically don’t cover flood damage. Disaster assistance payouts will not come close to covering all the damage that people typically suffer from a flood. And the most common type of disaster assistance is a loan that must be repaid with interest.

You can buy flood insurance through the NFIP regardless of your flood risk; it’s easy to get through any licensed broker. You can even use your credit card. Consider it seriously as we enter another hurricane season and a tropical wave is expected to slime us this weekend.

Posted by Bob Rehak on June 12, 2018

287 Days since Hurricane Harvey