Flooding is the number-one natural hazard in the United States, as documented by the Federal Emergency Management Agency and its National Flood Insurance Program. Yet despite the damage caused by hurricanes Irene and Sandy, only 13 percent of American homeowners have flood insurance, according to the Insurance Information Institute.
Pat Breslin, spokesman for New Jersey Manufacturer’s Insurance, said his company’s numbers are much lower. Out of NJM’s 280,000 homeowner policies, roughly 11,000 — 4 percent — have flood coverage.
“We’ve had a lot more interest since Hurricane Sandy, but no statistical difference in the last six months,” he said. “The education of our policyholders about flood insurance is an ongoing process.”
New Jersey Manufacturers is in the process of mailing information to customers about the importance of flood insurance, as well as updates about the company’s response to Hurricane Sandy. Breslin said almost half of NJM’s flood policyholders had claims related to Sandy, and 98 percent of those claims have been closed. The company paid $241 million for Sandy-related damage, he said.
“Those numbers attest to the important protection that flood coverage provides,” he said.
FEMA usually classifies properties as either high flood risks or low-to-moderate risks. In a survey by Bankrate.com, only 51 percent of homeowners said they knew what their risk category is. In a separate poll by the Insurance Information Institute, 81 percent of homeowners said they understand that a standard homeowner’s policy doesn’t cover flooding.
“I was very happy that four out of five survey respondents understood that standard homeowners’ insurance does not cover flood,” said Michael Barry, spokesman for the Insurance Information Institute. “This number is a much higher awareness level than we've seen in the past.”
Though many customers are aware of whether they have flood insurance, such policies are not always cut and dry, said Donald W. Kiel, an insurance lawyer with K&L Gates.
“I’ve found in connection with Hurricane Sandy claims that many entities did not have the flood insurance they thought they had,” Kiel said. “The insurance company often says the policy doesn’t apply to certain aspects of the claim. For example, a business might think the policy covers lost revenue due to business interruption, but that’s an add-on coverage. The policy only covers physical damage.”