Florida homeowners shell out thousands, if not tens of thousands, for homeowners insurance to protect against severe storms like Hurricane Ian.
But tens of thousands of people hit by the Category 4 storm in September are now finding they didn’t have the coverage they needed for one of the storm’s biggest impacts: flood insurance.
It’s one of the hardest — and most expensive — lessons of the 2022 hurricane season, which officially ends on Wednesday.
Florida’s home insurance market has been struggling for decades, but experts fear back-to-back strikes from Hurricanes Ian and Nicholas could be enough to tip the shaky wind damage insurance market into another meltdown. Govt. Ron DeSantis hinted at another special session on the topic being held soon, but it’s unclear if lawmakers will even try to tackle the already skyrocketing costs of private insurance and rising risk load of the option managed by the State, the Citizens Property Insurance Co.
And even if they do, coverage for Florida’s most common peril — flooding — won’t be on the table for discussion.
Flood insurance is almost entirely managed by the federal government, which sets strict rules and price caps on who needs it and how much it costs. Experts say that despite government efforts to make flood insurance cheap and available, Florida faces a huge coverage gap that could widen further as the state’s population — and flood risk — grows and the number of policies slowly declines.
By one estimate, flood damage could account for half of Hurricane Ian’s total losses in Florida. The category 4 storm hit Southwest Florida end of september, strokes Fort Myers and other areas with double-stage storm surges and high winds.
But it was the slow northward slide across the rest of the state, when the much weaker storm dumped more than a foot of rain, that shocked inland residents.
Low-lying areas soon flooded, leaving some apartment complexes with an entire story underwater. The authorities had to rescue more than a hundred residents trapped in their homes and cars. The river of peacein Southwest Floridainflated from 130 feet wide to nearly a mile wide.
And when the floodwaters finally receded, many Floridians on Ian’s path – then Nicholas – found that they were not covered for damages.
Only about 18% of households Florida Counties that were under evacuation orders from Hurricane Ian had a federal flood insurance policy, according to an analysis by risk management firm Milliman. In inland counties, those numbers drop even further.
Compare Lee Countywhere Ian made landfall, at Seminole Countyin the north of Orlando. In Lee, approximately 51% of properties within flood zones have flood insurance. In Seminole, only 37% do. Either way, that leaves thousands of people uninsured for flood damage outside the coverage of most homeowners and storm policies. Claims will likely be rejected.
“People just expect to be protected and it’s very distressing and upsetting for them to find out they’ve paid the premiums and don’t have the coverage they need,” said Nancy Watkins, principal actuary and consultant at Milliman. “A lot of times the reason they don’t have a flood insurance policy is that they mistakenly think their home insurance policy would cover it.”
Few home insurance policies cover flood damage. Instead, nearly all flood insurance policies in the country go through the FEMA-run National Flood Insurance Program, which insures 1.7 million Floridians. The state actually has the most flood policies under the federal program, but the 2022 hurricane season has been a sobering reminder of how many people don’t have it.
An initial estimate by CoreLogic, a real estate information and analysis company, suggested that half of the flood damage Florida seen from Ian might not be assured.
Tom Larsenvice president of risk and hazard mitigation at CoreLogic, said his company also discovered Ian’s damage in Florida extended outside FEMA flood zones.
“We saw more damage outside of these areas than inside,” Larsen said. “It doesn’t take a lot of water to cause a lot of damage.”
How much damage have hurricanes caused?
florida Insurance Regulatory Office almost counted $10 billion in total losses from Hurricane Ian so far. This includes losses to homes, commercial properties and private flood insurance claims.
Initial estimates of FEMA suggest that the federal flood insurance program, which insures the vast majority of Floridians with flood policies, could see $3.5 billion at $5.3 billion of losses from the five states affected by Ian, with the majority of these claims coming from Florida.
The relatively small private flood insurance market in Florida, with just under 100,000 policies at the end of 2021, has also been affected.
Trevor Burgess, CEO of Neptune Flood, said his company owns about a third of Florida’s policies. He ranked Ian as the costliest storm the company has faced since its inception five years ago, but did not offer a dollar estimate.
“Ian will be our biggest claim event after Ida last year,” he said. “Having them year after year is consistent.”
For Hurricane Nicole, Florida’s total property losses are slimmer but still significant at just under $400 million.
What does flood insurance cover?
For the lucky few who had the right insurance to cover hurricane damage, there is money from FEMA down the line in at least a few ways.
Since mid-November, FEMA said more than 40,000 Floridians have filed flood damage claims related to Ian. They’ll likely get some help fixing their home, but that probably won’t cover a full replacement. The NFIP, like many private flood offerings, is capped at $250,000 cover.
The situation is worse for those without flood insurance.
“An inch of water in your home can easily be a $25,000 expenses,” Watkins said.
Uninsured people will have to loot their savings or hope for help from charities or state and county grants. Federal grants are not an option. FEMA reserves its grant programs for fixes such as home elevation or flood protection for those with active flood insurance policies.
FEMA disaster relief for uninsured properties is generally capped at approximately $10,000said Watkins, and it can take a very long time to materialize in people’s bank accounts.
Drop in the number of flood insurances
Yet despite the growing risk of flooding — which Watkins says is the most common disaster facing Floridians — the Sunshine State has fewer residents with flood insurance each year.
Burgess, with Neptune, said his company had produced data showing that 18% of Florida buildings had flood insurance five years ago, and today that figure is 15%.
“This is going in the wrong direction. We need many more people to buy flood insurance to be protected against this peril,” he said.
It’s hard to sell Floridaeven if we consider that the rise in sea level makes harmful floods more frequent and more intense.
The main reason is probably that flood insurance, unlike property insurance, is not mandatory for most homes. Any home purchased with a mortgage must have home insurance, but homes purchased with a mortgage only need to have flood insurance if they are in a designated area. FEMA flood zone.
And even then, research shows that many of the properties required by their lenders to hold flood insurance policies drop them without consequences.
A recent overhaul of the federal flood program, known as Risk Rating 2.0, aims to insure more people at market premiums, a move that could help the NFIP out of its rut. $20 billion debt hole.
The federal government is rolling out new flood insurance rates. 1 million in Florida will pay more
For Joel ScataAn attorney for the Natural Resources Defense Council’s water and climate team, the damage caused by Hurricane Ian is another indication that the federal program needs to be reformed to encourage people to live farther from at-risk areas.
“Floods, in general, are becoming more frequent, both inland and on the coast, due to rising sea levels and intense rains,” he said. “The NFIP has the opportunity to be a linchpin in the WE approach to flood risk mitigation with respect to climate change.
Average flood insurance premiums are approximately $600 a year in Florida, according to data collected by Forbes. Which does Florida one of the cheapest states in the nation for flood insurance, despite having some of the highest home and storm insurance premiums in the nation at over $4,000 a year.
“People don’t want to pay more money to buy more coverage that they don’t have now,” Watkins said. “But you don’t find out you need it until it’s too late.”
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