For some, flood insurance is mandatory, but everyone should weigh their options, experts say

Hurricane Harvey isn’t just a humanitarian calamity: It’s a financial one, too, with an expected toll in the tens of billions of dollars.

That economic pain is being aggravated by a widespread lack of flood insurance. Only about 15 percent of homeowners in Houston’s Harris County have it, according to media reports.

Lancaster County homeowners should take note, local experts say.

To be sure, not everyone needs flood insurance. But standard homeowner and rental policies don’t cover flood damage, so if you live near a creek or stream and if there’s any history of flooding in or around your property, then it’s a good idea to have it, said Randy Gockley, director of the Lancaster County Emergency Management Agency.

Every homeowner should at least get price quotes and make an informed decision, said Bill Ross Jr., co-owner of the Ross Insurance Agency on Lititz Pike.

“You don’t have to be in a flood zone to have flood exposure,” Ross said, adding: “Far too many people unknowingly take on that risk.”

Floods are the United States’ most common and costly type of natural disaster, according to the Federal Emergency Management Agency.

Federal program

Almost all flood insurance is provided through the federal National Flood Insurance Program, created in the late 1960s. Recently, private “surplus lines” flood insurance has become available in Pennsylvania, providing an alternative that’s often less expensive.

Flood insurance is mandatory in order to get a federally insured mortgage on a property in designated flood hazard zones.

Lenders differ in whether the requirement is triggered by the building being in the zone, or just the land, and in the amount of coverage they require. Some insist on insurance for full replacement cost, local brokers said, but you don’t want to pay for more coverage than you would realistically need.

Limitations

The NFIP’s insurance has some characteristics that consumers should be aware of:

• The deductible applies separately to the structure and its contents.

• Losses to a property’s contents below ground aren’t covered, except for utilities such as a furnace. So the furniture in a finished basement, for example, wouldn’t be covered.

• A certificate documenting the exact elevation of the building may be required.

• There’s typically a 30-day waiting period before coverage takes effect.

Local flood zones

There are several flood hazard zones in Lancaster County, such as in Marietta and around Chiques Creek in Penn Township and Manheim.

Insurance in hazard zones is generally expensive, and premiums can vary dramatically from property to property, brokers said. Even small differences in elevation can matter a lot.

Premiums are expected to rise further in the next couple of years. The NFIP is $25 billion in debt already, even before the hit it will take from Hurricane Harvey. Congress is due to reauthorize the program by the end of September.

The more quotes you compare, the more likely you are to get a competitive price, Ross said.

Outside designated areas, flood coverage is optional, and prices are much lower.

“You can buy a flood policy no matter where you are,” said Steve Faus, president of The Hess Agency in Manheim.

Many do without

Still, most people, if they have a choice, do without it, he and other professionals said.

They noted there’s one sort of “flood” coverage that can be added to homeowner policies: Sewer and drain backups.

Some people forego flood insurance even in high-risk areas.

One of them is Bob Heiserman, who owns Donegal Real Estate in Marietta. His office building is susceptible to flooding, but doesn’t have to have flood insurance, because he doesn’t have a mortgage.

He thinks coverage is unfairly expensive here. When Marietta floods, the water rises slowly, rather than rushing in with the kind of force that causes structural damage, he said.

So the risk of major claims is lower, but flood insurance premiums don’t take that into account, he said.

“There isn’t any pro-rating based on the likelihood of flooding and the severity of the damage,” he said.

The worst flood damage in Lancaster County in recent years came in 2011, when Tropical Storm Lee hit the area. It caused about $35 million in damage, Gockley estimated.

More than 3,000 residents registered claims with FEMA. People sometimes think disaster aid will take care of everything, but that’s far from true, Gockley cautioned. In 2011, payments maxed out at about $30,000, even for people whose homes were destroyed.

“If you don’t have flood insurance, your life will not be totally rebuilt by the government,” he said.

Credit: TIM STUHLDREHER | Staff Writer