Specializing in Insurance, Bonds & Benefits


You need a reliable answer to this question: ‘Do I need flood insurance?’

Thursday, November 19th, 2020

Not everyone needs flood insurance. But those who need it, really need it. And not all those who need it have it.

Only about 30 percent of homes in the highest-risk areas have flood insurance. Worse, less than a quarter of the buildings flooded by Hurricanes Harvey, Sandy, and Irma were insured for flooding, according to a report from the University of Pennsylvania’s Wharton School of Business.

And damage from flooding is not usually covered under a standard commercial policy, including a Commercial Package Policy (CPP) or a Business Owners Policy (BOP).

What does it cover?

Flood insurance covers damage to your building and contents caused by flood – which can mean overflowing rivers or streams, heavy or prolonged rain, storm surge, snowmelt, blocked storm drainage systems, broken dams or levees, or other similar causes.

And too often, the flooding comes as a complete surprise to the property owner. Many homeowners end up losing their life savings for lack of coverage.

Complicating all this is the fact that it’s gotten harder to know exactly which areas have the highest risk.

How it has worked in the past

Property owners have historically been required to buy flood insurance if their home or building falls in a high-risk flood zone, as determined by that Federal Emergency Management Agency’s maps. The requirement kicks in with a mortgage that is from a federally regulated or insured lender. Those maps use historical data to predict flooding.

But these maps are often outdated. FEMA itself says more than a fifth of flood claims come from properties outside the established high-risk flood zones.

That can cause both insurers and those they cover to be unprepared for the actual resulting cost of flood damage. That means higher prices for everyone, because the insurance company can’t charge a rate that truly matches the risk, and therefore has to charge everyone a higher rate to cover costs.

How maps get outdated

Maps get outdated for a number of reasons. Flooding itself can change the surrounding topography so that it no longer matches existing maps.

Then there’s climate change, which has caused storms to become more severe and flood areas that had been considered safe. And sea levels are rising. The National Oceanic and Atmospheric Administration predicts high tide flooding could double or even triple by 2030.

There are, however, new tools that are helping experts better predict future flooding.

In June, First Street Foundation released flood risk data for more than 142 million homes and properties across the country. Their tools found 6 million more properties have substantial flood risk than predicted by FEMA. The study considered data beyond one specific type of event, looking at things such as heavy precipitation, riverine flooding, coastal storms and sea-level rise.

It gives a more comprehensive look at flood risk overall.

Do you need flood insurance?

Do YOU need flood insurance? Here’s a Q&A we ran across recently that helps you answer that, at least for commercial property.

But beyond that, you should get an expert of your own to look at your risk and help you find what you need to manage it. Reach out to one of the professionals at South Risk Management, and we’ll help you sort it out.