Florence – another wake-up call

Castles in the Sand

If you live in Florida or other states along the East Coast almost up to Canada hurricanes and coastal flooding are just part of the territory. A little over a month ago, everyone in these regions had another wake-up call when Hurricane Florence blew into all of North Carolina and most of South Carolina before moving west. Although Florence made landfall as a Category 1, she was an enormous slow-moving storm that lingered for days dumping large amounts of rain into coastal communities and inland rivers.

Whenever a storm of this magnitude hits, it always makes everyone take stock of their flood insurance situation or lack thereof. According to the National Flood Insurance Program’s records, fewer homeowners in the Carolinas own flood insurance than five years ago. As of July 31, the latest figures available, the number of flood insurance policies in place were down 3.6 percent from 2013. In South Carolina, flood policies were down 1.2 percent. This is in spite of the region’s significant coastal development in recent years.

That said, after last year’s hurricanes and subsequent flooding from Harvey, Irma and Maria, policy ownership rose 3.6 percent in North Carolina and 2.8 percent in South Carolina. These states have seen an influx of retirees and young families from the Northeast and California seeking more affordable homes but may not really appreciate the importance of flood insurance and exactly what it covers if they have never lived in a flood-prone region.

Thanks to the Flood Disaster Protection Act, everyone who lives in a flood zone can purchase flood insurance and The Federal Emergency Management Agency (FEMA) produces flood maps for this purpose outlining special flood hazard areas. The Flood Disaster Protection Act is a government subsidized program, and as we know, the government has been attempting to lower their financial exposure because of this huge subsidized program with premiums going up annually.

If you have a mortgage on your home, your lender will require you to have flood insurance, and even if you live in a condominium, the lender will require proof of flood insurance purchased by your condo association annually. The flood coverage at a minimum needs to be at least equal to the lesser of the combined outstanding balance of all loans and lines of credit limit and 100 percent of the estimated replacement cost value of the building.

However, many homeowners who do not have outstanding mortgages because they are either paid up or the property was purchased with cash, choose to go without flood insurance, especially in recent years since premiums have increased in cost. This is especially true of residents who have lived a long time in areas that have never flooded and become overconfident about the future. But as we know it, only takes one bad storm combined with stalled downpours and high tides to change all that.

And for those homeowners who go without flood insurance and look to the federal government to bail them out, well they may be a little disappointed. The Federal Emergency Management Agency may provide a fraction of what it will take to repair their damaged property and bounce back, but it could take a long time to get those funds, little as they may be.

The bottom line is if you live in a designated flood zone, buy flood insurance even if you’re not mandated by a lender. Anything else is just crazy and too risky. Be responsible even though the storms aren’t.

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