Hurricane Florence is estimated to have caused between $38 billion and $50 billion in total economic losses. Flood insurance is not part of a standard homeowner’s insurance policy, although many people assume coverage. Most homeowners who take out flood insurance do so through the National Flood Insurance Program (NFIP). Unfortunately, only about one in every 10 homeowners affected by the storm had flood insurance, reports CoreLogic. This means insurance covers between $2 and $5 billion of the losses associated with Hurricane Florence. About 85 percent of the residential losses in the area were uninsured.
Why Don’t Homeowners Have Flood Insurance?
One of the biggest reasons most homeowners don’t have flood insurance is that they simply don’t have to. This specialized insurance is not part of standard homeowners’ policies. But according to a survey by the Insurance Information Institute, 43 percent of homeowners believe their standard policy does cover heavy rain flooding. In reality, there are very few scenarios in which a standard policy would cover damage caused by heavy flooding.
This discrepancy between belief and reality is likely to create a serious issue for affected homeowners who want to rebuild their homes, since, “from a property insurance point of view, [Florence] is insignificant,” as one insurer put it. On the other hand, this may lead future property owners to also underestimate the need for specific flood insurance policies.
The most common disaster in the United States is flooding, according to NAR President Elizabeth Mendenhall. It affects coastal and inland Americans every year. And with flood risks rising, this is likely to continue to be a significant factor in coastal markets around the country in the coming years.