Can Your Homeowners Insurance Weather Storm Season?
Various sources, including the National Oceanic and Atmospheric Administration (NOAA), predict an especially active 2024 Atlantic hurricane season, which started on June 1 and continues through November 30. The NOAA is forecasting between 17 to 25 named storms (wind speeds of at least 39 mph), with roughly half of those storms expected to become hurricanes (winds of 74 mph or more). Alberto, the first tropical storm of 2024, made landfall in Mexico on June 19, causing widespread coastal flooding along the U.S. Gulf Coast.
Tropical Storms and Hurricanes in the Northeast U.S.
It may be tempting to dismiss the threat of hurricanes and tropical storms here in the Northeast, but climate change has made these once-rare events all too frequent. In fact, the Insurance Information Institute (III) website ranks the metropolitan area of New York, Newark and Jersey City as facing the greatest risk for storm surge and hurricane wind.
When the remnants of Tropical Storm Ophelia drenched the New York metropolitan area in September 2023, many property owners discovered that their homeowners’ insurance excluded damage caused by floodwaters. Both coastal flooding—overflow of inland or tidal waters—and flash flooding—rapid accumulation or runoff of surface waters—require special flood insurance, available from the National Flood Insurance Program (NFIP) and private insurers.
Floods are the leading cause of property loss, responsible for more deaths in the U.S. than any other disaster. The NFIP reports that 90% of natural disasters in the United States involve flooding.
Properties That Need Flood Insurance
Some properties identified on flood maps as being in high-risk areas must carry flood insurance if the mortgage is held by a federally regulated lender. However, flooding can happen anywhere that receives rain or snow. In fact, on average, 40% of NFIP flood insurance claims fall outside high-risk flood areas.
With more extreme weather linked to climate change, even homeowners in areas of low-to-moderate flooding risk should consider flood coverage. The Federal Emergency Management Agency (FEMA) reports that 99% of U.S. counties were affected by a flooding event between 1996 and 2019, with an average NFIP flood claim payout of $52,000 in 2019. Even one inch of flood water can cause up to $25,000 in damage.
What Flood Insurance Covers
Flood insurance usually consists of two policies—one that protects the building, another that covers contents—that can be purchased separately. Residential properties (1-4 families) can be insured for up to $250,000, with contents insured for a maximum of $100,000. Commercial properties can be insured for up to $500,000 for both the building and for its contents. NFIP insurance rates are set by the government, so pricing won’t vary much from agency to agency.
Property owners can buy flood coverage at any time, but they usually have to wait 30 days before the policy goes into effect. Also, homeowners cannot increase the amount of coverage after the flooding starts.
Private insurance companies, not affiliated with the NFIP, also offer flood insurance, and their rates and coverage can vary. Homeowners can also turn to a private carrier for excess flood insurance coverage, which will increase the limits of either federal or private flood insurance policies. Policy limits and deductibles will vary, based upon the flood risk of the zone where the building is located.
How to Shop for Flood Insurance
When it comes to flood insurance, having the right insurance partner can make all the difference. Since government-issued flood insurance policies are the same, regardless of where they’re purchased, it’s important to choose an agent or broker who will deliver prompt, painless service in case of a claim. When considering private flood insurance and excess flood insurance policies, a knowledgeable insurance partner can help you select the right coverage for your specific needs.
