Insurance gaps exposed as more than half of Texas flood victims go without coverage

Insurance gaps exposed as more than half of Texas flood victims go without coverage

Insurance gaps exposed as more than half of Texas flood victims go without coverage Historic flooding overwhelmed Texas and Oklahoma homeowners over Memorial Day weekend, but many are being forced to rebuild without the help of an insurance payout.

A state of disaster was declared in 32 Texas counties by Tuesday, as the Blanco River surged more than 40 feet, killing 17 people and damaging hundreds of homes. Local officials have warned that the flooding could continue for weeks, and heavy rain could trigger flash flooding events.

Yet very few residents in the affected areas have a valid flood insurance policy, according to one industry body chief. In fact, the number of covered homeowners in Texas has declined in recent years and even those that do have a flood policy are finding their coverage insufficient.

“I think less than half of the homeowners affected had flood insurance,” said Mark Hanna, a spokesman for the Insurance Council of Texas, which represents 500 insurance companies in the state.

The numbers actually represent a nationwide trend – according to the III’s annual Pulse survey, just 10% of homeowners and businesses carry current flood insurance – down from 14% in 2012.

Carole Walker, director of the Rocky Mountain Insurance Information Association, believes the decision to purchase flood insurance largely remains one of affordability, even in the face of increasing storm events.

“Flooding is our most common natural disaster that isn’t covered under a standard policy, but unfortunately, most people don’t carry insurance,” said Walker, whose native Colorado boasts just 22,000 flood insurance policyholders despite recent rainstorms. “Flooding takes many people by surprise, and most people just weigh the risk and decide to run with it.”

However, home and business owners who choose to ignore the lessons of events like the Texas floods and Hurricane Sandy do so at their own peril.  The III notes that 25% of businesses that close their doors after natural disasters never reopen them, and Walker said federal resources like FEMA won’t always be there to help.

“How do you recover from something when you don’t have insurance?” she said. “People assume that these large-scale disasters will always be followed by a federal emergency declaration that will help them out. That isn’t always the case.”
Producers need to ensure that their clients recognize the importance of flood insurance, even if they feel the odds are in their favor – certainly the case in Texas, where a number of affected homes were not located on the flood plain.

“The big message here is, yes…we do get flash floods,” Walker said. “It’s our most common natural disaster, and we really urge agents to offer flood insurance to everyone and everyone should consider purchasing it, weighing their risk.”
  • KathyJ 6/1/2015 11:39:24 AM
    But a primary factor that the article does not address is the deductible. Even when your client does purchase the coverage, it's not the premium that is the issue. It is the unrealistic deductible (20%-30%+ of the building and BPP limits) that makes a delusion of the coverage. So it's not necessarily that the home and business owners choose to ignore lessons of events. A lot of those that close their doors do have coverage but the out-of-pocket deductible is so prohibitive that they cannot get past that expense for the insurance policy to start paying out. Are high deductible policies really insurance when the insurance companies collect the premium knowing that most insureds cannot afford to actually use the product.
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  • Anonymous 6/6/2015 2:14:02 PM

    You need better insurance then. 20-30% deductibles are highway robbery.

    My policy covers $250,000 for my house, $100,000 for the contents, and costs me $400/year... and, I have only a $1,200 deductible.

    Price shop, you can get a better deal!
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  • Fan of Paws 6/9/2015 10:03:09 AM
    Unfortunately Flood Insurance isn't designed to be competitive. And typically floods don't occur in flood zones, which opens another can of worms. Sadly worms and vermin usually are not covered perils (ok I was making a joke on that part)
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