Flood Insurance Gamble A Poor Bet

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Release date: 
May 27, 2003
Release Number: 
1455-68

Charleston, WV -- West Virginians took great care to limit legal gambling to a few very specific locations a few years ago.

But every year, hundreds of thousands of residents throughout the state are taking a much more costly bet that they won't be hit by floods.

It's a poor wager that many of them are going to lose according to state and federal recovery officials overseeing recovery operations following the federally declared flood disasters in 2000, 2001, 2002 and 2003.

"If more people knew the real risks and were aware of the real odds we'd have a lot more people signing up for flood insurance," said Federal Coordinating Officer Lou Botta. He said that it was a major goal of the National Flood Insurance Program (NFIP) to simplify legal language and reams of statistics so that the clear benefits of purchasing flood protection coverage could be seen.

NFIP State Coordinator Robert Perry stressed that he understood the cost of purchasing coverage was an important factor in making a decision to buy NFIP protection. "When you have to pay out hard-earned dollars to protect against something that might happen, people have a tendency to downplay the risks," he said. "And that can be very costly."

He explained that data shows people in flood-prone areas are far likelier to experience a flood than a fire. During the life of a 30-year mortgage, the one-percent annual chance flood ("100-year flood") has a 26 percent chance of occurring. This means a home in the mapped flood hazard area is five times more likely to be damaged by flood than to have a major fire. Yet, many people who readily buy fire or homeowners insurance underestimate the much greater risk of floods.

Another major underestimate is the cost of repairing flood damage. In the last fiscal year alone NFIP paid out 595 claims to state policyholders covering $5.5 million for flood damage and loss claims. Officials said that figure was consistent with historical averages and that in the past 25 years more than $177 million in state claims had been paid.

"It is up to us to communicate the benefits of flood insurance so that people can clearly see why it's a good buy," said Botta.

He said that nearly 20,000 NFIP policies were currently in force throughout the state comprising total flood coverage of nearly $1.5 million. He added that over 100 new policyholders signed up for NFIP insurance last year alone.

"The best indicator of success is good word-of-mouth and neighbors are telling neighbors that flood insurance is worth it," Botta said. He noted that 25 percent of all flood loss claims occur outside the 100-year floodplain and insurance for structures located outside the floodplain can be very inexpensive.

The Preferred Risk Policy is available for most homeowners with a one- to -four family residential building located outside of a high-risk flood area and can cost as little as $106 a year.

Homeowners and renters can buy NFIP flood insurance through most major private insurance companies and licensed property insurance agents who sell homeowners' or property insurance or call the NFIP's toll-free information line at 800-427-4661 or for individuals with hearing or speech impairments (TTY/TDD) 800-427-5593.

Last Updated: 
July 16, 2012 - 18:46
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