Helpless. It’s the one word that most victims of floods end up coming back to when they describe their experience.
Through all the other emotions and fundamental trauma of loss, the feeling that inevitably emerges is that of pure helplessness as the water just keeps rising.
While recovering from a flood is never an easy process, having the right insurance coverage can mean the difference between an isolated unpleasant experience versus a long-term life setback.
Available through most home or auto insurance agents, flood insurance is underwritten by the National Flood Insurance Program (800-638-6620), a part of the Federal Emergency Management Agency. Traditional homeowner’s and renter’s insurance will not cover damage caused by overland flooding–a fact that is learned too late by hundreds of people each year.
The reason flood insurance is only available through the federal government is that the risks are simply too high and the costs too steep for commercial insurance companies. The National Flood Insurance Act of 1968 created the NFIP as a self-sufficient, not-for-profit entity out of recognition of this costly coverage vacuum.
“The chance of a home having a fire during the term of a 30-year mortgage is 1 percent. During the same 30-year period, the chance of a home in a flood plain flooding is 26 percent,” says Richard Roths, NFIP program specialist. “Flooding is the number one disaster in both economic impact and frequency.”
As with so many other housing issues, the key to flood insurance is location, location, location.
By federal law, homes in designated flood plains must have federal flood insurance as part of their mortgage loan. A flood plain is any area that has experienced flooding in the past, or any area that may not have flooded before, but could in the future due to certain changes in the land structure, such as new property development.
“We map areas where there is a 1 percent chance per year of a flood as a flood plain. When these areas flood, people then call it a 100-year flood, which really isn’t the same thing as a 1 percent chance per year.” Roths says. “If you talk in terms of `a 100-year flood’ no one thinks it will happen to them.”
The impact of a major flood caught all too many unaware and uninsured in Aurora in July 1996. Nearly 17 inches of rain fell in a 24-hour period, flooding the Fox River and sending water into more than 600 area homes. Some areas hit had seen major flooding 10 years earlier, and as such, were in an identified flood plain where flood insurance was required.
Other locations, such as the Cherry Hill neighborhood in Aurora, were in the process of being mapped as a potential flood plain area, with most residents unaware of the danger.
According to Kenneth Palmatier, chairman of the Cherry Hill Homeowners Association, by the time the water started to recede, 163 Cherry Hill homes had taken in water, with 103 of those experiencing flooding on the first or main living floor and $7.5 million in damages. Palmatier says virtually none of the homes flooded had flood insurance.
“If they did, it was by happenstance,” he says. “Why would we have flood insurance if we didn’t think we were in the flood plain? It would have been nice to have had that map information sooner than later, but we didn’t.”
As a result, the only financial assistance available came after the region was declared a Presidential Disaster Area. Even then, Palmatier says, the most Cherry Hill residents received was a $10,000 grant. Most of the homeowners who suffered the greatest property damage were forced to go to the Small Business Association for a low-interest loan.
“Many of those people have now effectively lost most of the equity they had in their homes. Plus, some are still working on repairs that they’ll be paying on for a while. It’s a bad situation.” Palmatier says.
Created by FEMA in conjunction with local communities, flood plain maps are accessible to the public. In Chicago, the maps are kept at the Department of the Environment. Other communities may keep them at the planning or zoning office. Maps are also available by mail for a small fee by calling 800-358-9616.
The Cherry Hill example, however, shows that just because a property is not in the current flood plain map, it doesn’t mean the property is not at risk. The Aurora flooding also illustrates the fact that until something forces a flood threat to the top of a homeowner’s priority list, most simply won’t worry about it.
“If you look at areas that were not in the flood plain, those residents didn’t have flood insurance because no one is forcing them to have it,” says David Pierce, former mayor of Aurora who was in office during the 1996 flood.
“People were surprised first by the flood, and then again by the amount of aid available afterward,” he added. “A lot were expecting the government and insurance companies to cover everything, to make them whole again. That’s not how it works.”
Linda Sacia of FEMA’s Region Five office in Chicago has experienced the shock and disappointment of uninsured flood victims when they learn how little aid really is available, even after an official emergency declaration.
“What we give out in disaster assistance is very small in relationship to people’s needs,” she noted. “The average housing assistance is $2,000. That may keep you going for a while, but, long-term, it’s not going to help a whole lot.”
Unlike federal assistance, flood insurance is not dependent on a presidential declaration of emergency. It is because of the scale of the costs of flooding, along with the true unpredictability of floods, that Roths and the NFIP suggest coverage for everyone, in or out of a flood plain.
“Nearly 40 percent of all our claims come from outside the flood plain,” Roths says. “Floods and rainstorms don’t read maps. The rates for those outside the flood plain are substantially reduced, so there’s really no reason not to take advantage of the protection.”
Separate flood insurance is sold for a home’s structure and for its contents, with rates set according to whether or not a structure lies in the flood plain. Other individual factors, such as the specific elevation of a lot or structure may also be taken into consideration if a property owner disagrees with a map placement.
Typical costs for $100,000 in structural coverage will run a homeowner within the flood plain about $300 per year. That figure drops to about $100 for homes outside the flood plain. The maximum amounts available are $250,000 in structural flood insurance and $100,000 in contents coverage. There is a 90-day waiting period before new policies take effect.
Structural coverage includes structural foundation elements, basement walls, floors, utility connections, and basement appliances such as furnaces and water heaters. Contents coverage includes most items outside the basement not affixed to the property, such as furniture and clothing.
In addition to the location of a property, Roths notes the age of a home will also affect flood insurance rates.
“Theoretically, a person who built 50 years ago didn’t know about the risk, so they get a subsidized rate. Newer homes constructed after flood plain information became available should be aware of the risk, and therefore pay actuarial rates,” he says.
Before deciding on how much (if any) coverage to buy, homeowners should understand how the NFIP defines a flood. The coverage is only applicable to damage caused by the overland flow of water, such as the flooding of a river or lake, or the accumulation of runoff water.
Former Aurora Mayor Pierce says this definition is a vital point for many homeowners to discuss with their insurance agents.
“Many of the basement floodings that took place in Aurora were not from overland water, but rather from sewer backups, which would not have been covered by flood insurance anyway,” Pierce says. “In most cases, those types of damages had to be covered by a special rider in a homeowner’s policy. Some people had the rider, and some didn’t. That’s a conversation everyone should have with their insurance agent.”
Now, almost two years after the flooding in Aurora, Sacia from FEMA says that while the number of flood insurance policies did go up in that area, she doesn’t expect it to be a long-term commitment for many.
“We usually see numbers of policies go up after a flood, and then after a while people let it lapse unless it’s been tied into their mortgage,” she says.
Cherry Hill resident Palmatier says he lives in a high enough area that he will play the odds and go without flood insurance, though he says he has recommended coverage to other residents.
“I tell them to do it now so they can be grandfathered in at a lower rate, and cancel later if they find out they’re not in a flood plain, or just keep it for the peace of mind. Some have followed my advice, but most are taking the gamble like me.”
Sacia says she understands the “it won’t happen to me” mentality, but says she knows the eventual outcome all too well. “Living in a flood plain will cost you,” she says. “It is a risk and there is a cost. Flood insurance is a small price to pay. Nothing wakes people up to that quite like a flood.”
