Many Cape homeowners may be underwater, underinsured

Aug. 06--BARNSTABLE -- The prospect of a hurricane tearing up the East Coast through Long Island and Connecticut, hitting Cape Cod and heading up to Maine "is an event that keeps insurance people awake at night," according to Robert DeSaulniers, a flood insurance specialist for the Federal Emergency Management Agency's northeast region.

"Experienced insurance property underwriters, without looking at hurricane maps, will tell you we are so overdue for a major hurricane," he said.

Federal disaster funds could be a long time coming and meager in size, DeSaulniers said, so purchasing National Flood Insurance Program policies through the federal government is a property owner's best bet.

The majority of those living along the coast of the Cape, however, remain either unaware of the option or simply resistant.

The series of nor'easters that ripped through the region in January and March gave coastal residents just a small taste of what could happen if a Category 3 or greater hurricane were to veer their way. Properties that had never been flooded before were underwater, and when it all drained away, owners had to grapple with hefty repairs, which in some cases have yet to be made.

The home of Joseph Dugas, on Sunset Lane in the Blish Point neighborhood of Barnstable, bordered on one side by the ocean and another by a marsh, was hit hard in both the January and March storms.

"Our cellar had 7 feet of water and it stayed flooded for a long time," Dugas said. "We lost electricity, the furnace, hot water heater, electrical panels and central air."

He replaced those utilities, only to lose them again in March.

"It cost me about $50,000," Dugas said. "I've lived here since 1968 and had nothing like this."

Eight other homes in the neighborhood are uninhabitable, he said. Several owners are putting their properties up for sale.

Dugas didn't have a National Flood Insurance policy and doesn't plan on getting one now, despite his experience.

'Gaps in federal insurance'

He's not alone. Only 35 percent of the property owners in the Barnstable County high-risk areas have enrolled in the National Flood Insurance Program, according to Shannon Jarbeau, Community Rating System coordinator for Barnstable County.

Dugas said he was "self-insured," paying off the damage in money that such policies would have charged in premiums.

"It would have cost us $7,000 to $8,000 initially and it's going up to about $10,000," Dugas said.

Flooding is the most common natural hazard in Massachusetts, according to the Homeowner's Handbook to Prepare for Coastal Hazards, developed by a group of state and federal agencies. It can be caused by hurricanes, tropical storms, or nor'easters.

Standard homeowners insurance policies cover some wind damage from hurricanes, although in 19 states, including Massachusetts, the coverage includes a sizable deductible.

"Usually the percentage of the deductible is between 2 and 5 percent," said Paul Silva, president of Benson, Young and Downs Insurance Agency in Provincetown. "If you had a $200,000 house, you would have a $4,000 deductible. If the house is $800,000, the deductible is $16,000."

Homeowners policies don't cover damage due to flooding, even if it is associated with a hurricane, but the National Flood Insurance Program, overseen by FEMA, has offered owners an opportunity to recoup at least some of their losses.

Top 10 flood events by National Flood Insurance Program payouts:

Residential policies include up to $250,000 in coverage for damage to a home's structure and essential systems such as heat and electricity. The program also offers a policy for personal property damage, capped at $100,000. Nonresidential property owners can get policies covering up to $500,000 for structures and $500,000 for personal property.

Fear of high premiums and large deductibles has caused many in the high-risk zones to shy away from getting government-backed policies.

Buildings in designated flood-hazard areas -- zones A and V on federal flood maps -- have slightly more than a one-in-four chance of flooding over the period of a 30-year mortgage. Owners that have federally backed mortgages in these flood-hazard areas are required to get National Flood Insurance Program policies.

After the winter's storms, homeowners' interest in purchasing those policies increased, according to Silva, "but they didn't necessarily buy it."

"There are a lot of gaps in federal insurance," Silva said. "Buildings here on the Cape are very old. A lot of costs would not be covered no matter what kind of policy you had."

Listen to a WCAI report by Kathryn Eident: One-of-a-kind Network Helps Cape Towns Weather Storms. Visit them on the web for more hurricane preparation coverage here.

If the expense of repairs represents 50 percent of a building's market value, the renovated structure must be in compliance with current flood plain ordinances, which can be expensive.

The government policies also don't cover the cost of those who must live somewhere else because their homes are uninhabitable.

Congress enacted the National Flood Insurance Program in 1968, but it has since undergone changes. Some of the most significant are recent adjustments to flood maps in 2014 that placed 8,000 Cape properties into high-risk zones that had not previously carried that designation.

Rising premiums

Premiums also are being adjusted through yearly increases, under the federal Biggert-Waters Act of 2012, to reflect the actual risk a property has of flood damage. The flood insurance program was $24 billion in the red after payouts for Superstorm Sandy.

Yearly increases on residential policies are capped at 15 percent but are usually less than that. Premiums on nonresidential properties go up 25 percent annually until they adequately reflect risk.

Congress just last week voted to extend the current National Flood Insurance Program to Nov. 30; it had been set to expire July 31. Without the extension, existing policies could not be renewed and home purchases in risk areas by buyers who needed mortgages, and therefore federal insurance, would have been delayed.

The average premium for Cape homeowners is about $1,300, "but it can be up to $10,000," Jarbeau said.

While property owners can purchase private flood insurance, Jarbeau says he doesn't believe many do, making that final 65 percent of owners self-insured.

One facet of Jarbeau's job is to help boost the number of properties with flood insurance, and she is doing that by helping secure better rates. Discounts are available in communities that qualify under the federal Community Rating System; communities can earn qualification by beefing up flood resilience through measures such as maintaining open space in high-risk areas, enacting building codes that require structures to be higher than the expected flood level, prohibiting fill in flood plains, keeping good mapping data, doing community outreach and providing information online, according to the Cape Cod Cooperative Extension.

"So far, eight towns get discounts in the Community Rating System and Barnstable is in the process," Jarbeau said.

Signing up for higher deductibles also lowers premiums. Taking a deductible up to $10,000 could lower one's premium to $1,000 annually, according to Jarbeau.

Building in some safeguards can also lower premiums. Adding 3 feet of freeboard to boost a home above predicted flood elevations can lower the insurance premium of a home in Zone A from $1,716 to $554. In Zone V, the premium would drop from $10,536 to $3,780 annually, based on information from the Massachusetts Executive Office of Energy and Environmental Affairs.

The National Flood Insurance Program is "a silo" of funding for communities after a flood disaster, DeSaulniers said, adding that the funds are more reliable than traditional FEMA disaster funds.

"We know the claims process doesn't always go smoothly, but the money will eventually arrive," DeSaulniers said of the flood insurance program funds. "Coverage under those policies provides millions."

Traditional FEMA disaster funds are available only if the president declares a state of emergency. FEMA surveys the damage and the money goes to the state. One can then apply for the funding under individual assistance.

"The cap is $33,000 on those and they never really get to that number most of the time," DeSaulniers said. "There is a loan program to borrow money at very low interest, but it has to be paid back."

DeSaulniers says everyone should have some level of flood insurance under the National Flood Insurance Program.

"The maps become an issue unto themselves," he said. "People can think, 'I'm only in danger if I'm on the map.' Look at Houston. Mother Nature doesn't check our maps."

Storm surge

John Ciluzzi, managing director of the Masthead Resort in Provincetown, has a National Flood Insurance Program policy.

"We have seven buildings along the water on the west end of Provincetown," he said.

The operation was hit hard in the January storm, with damage to furnishings, flooring, heating, plumbing and electrical systems.

Ciluzzi, who, like others, declined to provide the amount he spends on insurance or losses incurred, said he is looking at ways to improve resilience.

"We got generators, but we're still trying to figure out the best way to get the water off with pumps," he said.

Jay White, whose property at 147 Sunset Lane sits adjacent to Barnstable Harbor, said January's storm was frightening. As darkness fell, power was lost and tides surged.

"It came fast, and I've never seen anything like it," he said. "In about 15 minutes, there was a foot of water swirling around the house."

The house itself is protected by a rock seawall topped by some water-absorbing foliage, yet water surged to within a foot of the structure.

In the side yard, where water doesn't go beyond the eelgrass, a surge pulled away 4 to 5 feet of lawn, carving it down about 10 inches and leaving underground sprinkler tubes exposed, along with the stump of what was once the flagpole.

White said some water got into the crawl space of the house and the garage.

"We got off pretty easy, but it was scary," White said. "If we get hit with a hurricane like Sandy, it would be all over for the majority of the neighborhood."

White is among the uninsured.

"I'm hoping it doesn't happen again, but that's probably unrealistic," he said. "It's a roll of the dice."

Building resilience

Matthew Teague, who lives in White's neighborhood in an area across from the marsh, didn't fare as well. While he had a National Flood Insurance Program policy, damage from surging water was two or three times higher than what the program was offering, he said.

"Their responsiveness was good, but what they were offering wasn't worth pursuing, so we decided to move forward," Teague said.

A foundation for a new home, built under current ordinances for flood-prone regions, was poured last week.

Watch a video interview with Teague and a Cape hurricane expert

The house will again be insured through the federal program, since it will carry a mortgage. Teague estimates the cost at about $3,000 annually.

Teague, who is a builder, understands the need for built-in flood resilience.

"I deal with this all the time," he said. "When I get a call, the first thing I ask is whether it's in the flood zone. I have to break a lot of hearts."

"You can't hold back the tide," he said. "I think they've been saying that for a couple million years."

-- Follow Christine Legere on Twitter: @ChrisLegereCCT.

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