The ground floor of Susan Rall’s St. Petersburg, Florida, home was submerged in two feet of water during the storm surge caused by Hurricane Helen in late September, even though it is two rivers from the ocean. It was flooded.
Anything that couldn’t be taken upstairs was destroyed, she said. It now sits piled up on the roadside in front of the townhouse condo, along with neighbors’ water-soaked belongings, including antique furniture and a $3,000 leather sofa.
“It was like a nightmare,” Lal says. “We spent the night upstairs, praying the water wouldn’t rise that high.”
Just two weeks after Hurricane Helen made landfall in Florida on September 26, Florida’s west coast was hit by another major storm, Hurricane Milton. So Lal took shelter inland on the upper floor of a hotel, but the storm only damaged a few shingles of the roof.
Lal had flood insurance through his homeowners association that covered damage to the structure of Helen’s home. But she didn’t have flood insurance to cover her furniture and other belongings.
In fact, most of the damage caused by Helen, which caused catastrophic flooding in six states, will not be covered by insurance. It was, and continues to be, a financial shock to thousands of homeowners. Helen says this isn’t the first time this has happened in recent memory. And experts say it won’t be the last.
More than one in four U.S. homeowners (26%) are unprepared for the potential costs associated with extreme weather events in their area, according to Bankrate’s 2024 Extreme Weather Survey. answered. Homeowners insurance typically does not cover weather-related flooding, and people who don’t live in federally designated flood zones often don’t have another policy that provides coverage.
Almost half of all flood damage to homes occurs outside of flood zones, leaving many homeowners unprotected and unwilling to purchase flood insurance.
— Donald Hornstein, Director of the Center for Climate, Energy, Environment, and Economics, University of North Carolina at Chapel Hill
The average flood insurance policy costs $800, with lower premiums for homes outside of designated flood zones. According to the Insurance Information Institute (Triple I), only 1% of homeowners who experienced record flooding from Hurricane Helen had flood insurance.
According to CoreLogic, Helen caused $20 billion to $30 billion in uninsured flood damage. That dwarfs the $6 billion to $11 billion in losses covered by the federal government’s National Flood Insurance Program and private flood insurance, the real estate data firm said.
Hurricane Milton, a Category 3 storm that hit Florida nearly two weeks later, caused $4 billion to $6 billion in uninsured flood damage, which was covered by the NFIP and private insurance companies, according to CoreLogic. The amount is said to match the amount of flood damage.
SBA Loans for Homeowners in Disaster Areas
The Federal Emergency Management System (FEMA) provides assistance to uninsured flood victims, but typically for a fraction of the amount covered by flood insurance. FEMA paid an average of $3,000 per applicant for disaster relief grants from 2016 to 2022. By comparison, NFIP paid out an average of more than $66,000 to people with flood insurance, FEMA said.
FEMA says the maximum amount an uninsured homeowner can spend to repair or replace a home is $42,500. It won’t go far. The National Association of Home Builders estimates that it costs an average of $153 per square foot to build a home, but that doesn’t include the cost of removing damaged structures. This puts the cost to rebuild a modest 1,200 square foot home at about $183,600.
The Small and Medium Enterprise Entrepreneurs Association provides low-interest loans to businesses and individuals affected by disasters. Homeowners can apply for up to $500,000 if their primary residence is damaged in a federally declared disaster area. Both renters and homeowners can also apply for loans of up to $100,000 to replace personal assets lost in the disaster.
There are two pitfalls. Borrowers must have a suitable credit score to qualify. In other words, disaster-related economic shocks can’t be allowed to cause bills to be delinquent, but the SBA currently doesn’t have the funds.
“Until Congress appropriates additional funding, the SBA will suspend new loan proposals for direct, low-interest, long-term loans to disaster survivors,” the federal agency announced on October 15. Parliament will be in recess until mid-November.
Flood insurance program scheduled to end
The National Flood Insurance Program (NFIP) is $20.5 billion in the red and is scheduled to expire on December 20th. Congress has granted short-term extensions (usually six months) 30 times since 2017, and there have been three short-term expirations. The last multi-year reauthorization was extended for five years in 2012.
As of late last month, the NFIP had $5 billion available to pay claims and the authority to borrow up to $9.9 billion from the U.S. Treasury if needed. According to CoreLogic, the combined NFIP policy payments for Hurricanes Helen and Milton could reach $6.5 billion.
If a new weather disaster occurs, Congress could expand the flood insurance program’s borrowing authority. It also could cancel all or part of the program’s debt, as it did during a series of hurricanes in 2017 that prompted $16 billion in debt forgiveness.
The Biggert-Waters Flood Insurance Reform Act of 2012 has provisions aimed at promoting the private flood insurance market, benefiting consumers by providing coverage above the $250,000 NFIP insurance limit. Possibly. But in the decades since then, the private market has grown to only about 5% of flood insurance policies.
The reform bill also introduced risk-based pricing, which calculates flood insurance premiums based on a property’s specific flood risk. While some homeowners have found some respite, especially if they own smaller homes, flood insurance costs are rising for others.
Flash floods are on the rise
According to CoreLogic, Helen will cause devastating flooding in areas that don’t typically see rising water levels, including a path of destruction through North Carolina’s Blue Ridge Mountains, with some areas experiencing up to 30. It is said that an inch of rain fell.
According to the National Weather Service, 2024 has seen a record high of 91 flash flood emergencies, the highest level of risk in the United States so far. Warmer oceans increase evaporation, and warmer air retains more moisture, which is released inland as extreme precipitation.
There have been 57 federally declared major flood-related disasters so far this year, compared to 38 in 2023, according to FEMA. Most were located far from coastal areas that most homeowners associate with flood risk.
There really is no escape from extreme weather. Last year, storms in the Midwest caused more damage than all coasts combined.
— Donald Hornstein, Director of the Center for Climate, Energy, Environment, and Economics, University of North Carolina at Chapel Hill
FEMA’s flood maps have not kept pace with climate change, and mortgage lenders typically require homeowners to purchase flood insurance only if they are located in a federally declared flood zone. As a result, many people do not purchase flood insurance, leaving their largest financial asset unprotected in the event of a disaster.
In Asheville, North Carolina, residents are living with piles of flood debris in their neighborhoods after record flooding from the French Broad River that divides the city subsides. Only 0.9% of homes in the city of 93,000 people had flood insurance, according to FEMA data.
On Sept. 27, the river flooded at about 25 feet after 20 inches of rain fell, according to risk modeling firm Karen Clark & Company. Three weeks later, the City Council met for the first time since the flood and began discussing state and federal aid. Begin rebuilding the damaged areas.
“Cars are crushed, homes are damaged and children are out of school,” Asheville Mayor Esther Manheimer said at the beginning of the meeting, referring to city residents. “There’s a lot to overcome.”
Mortgage payments for collapsed houses
Hornstein, of the University of North Carolina, said the lack of flood insurance doesn’t bode well for people whose homes have been severely damaged or destroyed. After Hurricane Harvey caused devastating flooding in the Houston area in 2017, a pattern emerged in which homeowners without flood insurance were often unable to rebuild.
He said some people are unable to continue making mortgage payments on homes they can no longer live in, while suffering the financial blow that often includes paying rent to protect their families for more than a year.
Fannie Mae and Freddie Mac, the largest backers of U.S. mortgage loans, are offering homeowners affected by disasters access to temporary reductions or suspensions of mortgage payments and other resources such as counseling. We offer a deferment program. But the bottom line remains the same for owners who don’t have the funds to rebuild their uninhabitable homes and can’t qualify for SBA loans.
“After Hurricane Harvey, people lost their homes and started renting again,” Hornstein said. “That is likely to happen to some of the people affected by Hurricane Helen and other flood disasters. In addition to all the dire situations they are experiencing, some of the flood victims are The potential loss of financial assets is a tragedy.”
