Recent natural disasters have exposed how few Americans have flood insurance – with experts now warning of the potentially devastating impact this can have.
Large swathes of the southeast US have been hit by deadly hurricanes in recent weeks. Worst-hit areas in North Carolina are dealing with the ruins left by Hurricane Helene, which destroyed homes and brought widespread flooding late last month.
And in the immediate wake of Hurricane Milton‘s path of destruction through southwest Florida, residents are now surveying the wreckage.
The full extent of the damage caused by Milton is still yet to be seen. But these catastrophic weather events have laid bare an alarming gap in coverage for millions of Americans – which could make the road to recovery even more difficult for the communities ravaged by these storms.
Flood insurance is not included in homeowners insurance, and must be bought separately, which many Americans did not know.
Recent natural disasters have exposed how few Americans have flood insurance, and the potentially devastating impact this can have (Pictured: Floodwaters remaining from Hurricane Helene in Swannanoa, North Carolina)
‘We have a failed system for protecting people against flood damage,’ Douglas Heller, director of insurance at the Consumer Federation of America, told DailyMail.com.
Flood insurance is largely provided by the federal government through the National Flood Insurance Program (NFIP), or through a handful of private insurers.
In some areas, including parts of Florida, flood insurance is mandatory on government-backed mortgages for homes which are classified as high risk by the Federal Emergency Management Agency (FEMA).
Some banks also require the cover to take out a home loan in vulnerable areas designated by the agency’s traditional flood maps.
Still, only a staggering 4 percent of homeowners across the country have flood insurance, according to FEMA.
In western North Carolina, where some areas have been drowned in the floodwaters of Hurricane Helene, it is estimated that fewer than 1 percent of homes have the cover.
‘What’s happening is going to continue to expose the problem of severe levels of uninsured homes, especially in North Carolina,’ said Heller.
In Florida, there is a lot of damage done by wind and rain as well, he said, which means some damages may be covered by home insurance.
‘I’m concerned that there will be a lot of homes in North Carolina where insurance companies will be vigorously denying the claim that any of the damage was done because of rain or wind, and they will instead say it was all done by flooding, and say they don’t cover flood in the home insurance policy,’ he said.
Just one inch of floodwater can cause up to $25,000 in damage to a home, according to FEMA.
A person bicycles through floodwaters remaining from Hurricane Helene on October 4, 2024 in Swannanoa, North Carolina
A first responder in the water outside a flooded apartment complex after Hurricane Milton on October 10, 2024, in Clearwater, Florida
‘We have a failed system for protecting people against flood damage,’ Douglas Heller, director of insurance at the Consumer Federation of America, told DailyMail.com
There are many reasons why so many homes are foregoing this crucial cover.
The first is simply that many Americans assume that flood cover is included in their homeowner’s insurance.
Others may simply not understand the risk, Heller explained, or outdated flood maps designate that they are not in a high hazard zone so they do not think they need it.
And even in areas where flood insurance is mandated, some lenders may turn a blind eye, or some homeowners will drop the coverage once their mortgage is paid off.
Another reason is that Americans are shouldering all sorts of costs, Heller said, and they are looking to save money wherever they can.
Millions of Americans are already live in uninsured homes. In latest data from 2021, 6.1 million homeowners were uninsured – a number which has likely soared since then.
On top of this, insurers are increasingly hiking prices and pulling out of states including Florida entirely, as the cost of covering rising natural disasters mounts.
‘When people are looking to save money, they’re not going to add on extra insurance,’ said Heller.
‘We’ve actually been advocating to move all the different aspects of home insurance coverage into a single policy, because that is what people believe they’re buying and that’s what they want.’
The average cost of flood insurance from the federal government is $819 per year, according to analysis from NerdWallet.
This is on top of the average cost of homeowners insurance across the US, which Insurify projects will rise to $2,522 by the end of 2024.
In Florida, paying over $10,000 a year for coverage is already the norm, and concerns are growing for the financial stability of Citizens Property Insurance Corp, the state’s insurer of last resort.
The severity of Hurricane Helene’s destruction is likely to have caused between $20 billion and $30 billion worth of uninsured flood losses, according to data analytics firm CoreLogic.
It will be the responsibility of property owners to pay for these repairs.
While the extent of the destruction is not yet known, Wells Fargo has estimated that Hurricane Milton could cause as much as $100 billion in total losses.
For those that do have flood insurance, it will largely be provided through the indebted federal program, NFIP.
Moody’s figures that the NFIP likely will see losses approaching $2 billion from Hurricane Helene alone.
Some lawmakers are concerned that Milton could push the program to the edge of what it can borrow from the Treasury, potentially forcing Congress to raise its borrowing cap or pursue some kind of alternative funding, Politico reported.
The program has a current debt of $20.5 billion.
Destroyed and damaged buildings in the aftermath of Hurricane Helene flooding on October 8, 2024 in Bat Cave, North Carolina
A man cleans debris inside a gas station store in Lakewood Park, Florida, in the aftermath of Hurricane Milton
Allstate CEO Tom Wilson told CNBC on Friday that he believes the federal government needs to ‘get its act together’ to help combat the rising insurance crisis across the US.
For Heller, the concern is simply how few Americans are actually protected.
‘We have a public insurance program that is meant to serve Americans and the vast majority of Americans do not have the coverage,’ he told DailyMail.com.
‘One of the reasons that I think Congress has not taken it on is because the insurance industry is more than happy to to pass that particular risk on to the government and taxpayers, instead of finding a way to incorporate it into the home insurance policy.’
There are so many people in the wake of these hurricanes who will not just have had the catastrophe of the weather event, he said, but will have to face the disaster that follows when they realize there is no money for them to rebuild.
‘When you have a flood, it can take out a community, and if that community doesn’t have the resources to rebuild, it’s not just a few people who are struggling,’ he said.
‘It has the ripple effects even on those people in the in the area that weren’t affected by the flood, because it can have an economic effect for years.’
If nothing changes, he fears we are going to continue to see these ‘dramatic and terrible’ gaps in coverage.
‘We cannot afford to simply continue with the same approach to flood insurance that we have used for the last 50 years. It’s not working.’
