“The typical homeowners policy does not cover flood”.
Hunter of the CFA said that homeowners without flood insurance can possibly apply for federal disaster relief benefits, but those come in the form of low interest loans, a burden for those already struggling with too much debt.
Hurricane Harvey poses new hazards to a giant US flood insurer already facing mounting debt and a reauthorization fight in Congress. That means families with flooded basements, soaked furniture and water-damaged walls will have to dig deep into their pockets or take on more debt to fix up their homes.
There’s going to be a lot of homeless and helpless people in the aftermath of this storm. Similar take-up rates are found in neighboring counties, though the rate drops off the further inland from the immediate coastline. He said about two-thirds of that sum won’t be covered by insurers because much of it was caused by flooding, which is backstopped by the USA government.
Chuck Watson, a disaster modeler with Enki Research, told Bloomberg on Monday that about one-half damage from Katrina was covered by insurance, but he expected only one-quarter of damage from Harvey will be covered.
Homeowners should save receipts if they buy items such as tarps and plywood or other supplies to make repairs, as those may be reimbursed if they have a covered loss.
Nationally, a poll by the Insurance Information Institute showed only 12 percent of people in flood-prone coastal areas had flood insurance in 2016, down from 14 percent in 2015. Lenders can require it, based flood-risk maps that are drawn (and often, re-drawn) by Federal Emergency Management Agency.
A flood insurance policy provides protection from rising waters outside a home.
Houston’s flood maps were updated late previous year for the first time in a decade. It’s not clear how many of them signed up.
State Farm, for instance, has sent additional resources to the Austin area, preparing to deploy them to the hardest hit areas to help process claims when weather conditions improve.
“All these people taken out in boats, they have a second problem: They have no insurance”, said Robert Hunter, director of insurance at the Consumer Federation of America.
Harvey’s expected flood damage comes as Congress facing a deadline of the end of September to renew the federal flood program, which as a result of devastating storms like Hurricanes Katrina and Sandy is almost $25 billion in debt.
Property and casualty insurance stocks tend to underperform immediately after a catastrophic storm, but often beat the overall market once loss estimates become more accurate and insurers are able to stabilise or raise premium rates.
Craig Poulton, chief executive of Poulton Associates, which administers a private flood-insurance program, estimates that private primary flood insurance represents about 2% of the market. “However, the fact that the program’s debt appears likely to exceed $30 billion underscores that the program is unsustainable as now structured and that it is essential to make significant reforms to its operation”.
While political matters always must remain secondary to immediate threats to life and limb, the institute also notes that members of Congress returning from their August recess will need to act promptly to address at least two pressing legislative issues left in the storm’s wake: reauthorization of the National Flood Insurance Program, which expires September 30, and the likely need to raise the NFIP’s borrowing authority, which now stands at $30.4 billion.