Rand Corporation Study: Flood Insurance Is Underutilized 

Release Date: April 24, 2006
Release Number: 1603-447

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NEW ORLEANS, La. - For most homes and businesses, the only insurance protection against damage from rising water is flood insurance underwritten by the National Flood Insurance Program (NFIP). This program is greatly underutilized, according to a recent study by the RAND Corporation, a non-profit research organization. Across America , millions of eligible homes and businesses are insured under NFIP. Millions more are not, according to the study commissioned by the U.S. Department of Homeland Security's Federal Emergency Management Agency (FEMA), which administers flood insurance programs.

"The 2006 hurricane season begins June 1, and forecasters say this hurricane season could be as destructive as 2005, the worst on record," said FEMA Transitional Recovery Office Director Scott Wells. Only 396,000 policies are in effect in Louisiana.

Louisiana property owners pay an average annual premium of $477 for NFIP insurance. Houses can be insured up to $250,000 and contents up to $100,000. NFIP supplements the regular homeowner policy that may cover losses from fire, wind, lightening, falling trees and many other perils.

Much of the destructive power of Hurricanes Katrina and Rita was delivered on the shoulders of a coastal storm surge that shoved the waters of the Gulf of Mexico inland, slamming everything standing in the path. After the damages were assessed, property owners without flood insurance were offered settlements which fell far short of replacing their lost homes and businesses.

"If you try to make it without flood insurance, you could be looking at financial ruin," said Diana Herrera, spokeswoman for NFIP. Although flood insurance may be purchased throughout the year, Herrera pointed to the 30-day waiting period before coverage begins. "The door is open and now is the time to step through it," she said.

The RAND Corporation study was conducted in 100 flood-prone communities in all regions of the U.S. during the past three years. The analysis was based on 5,472 single-family homes in Special Flood Hazard Areas and 22,195 single-family homes outside of these areas. The study found that 60 percent of the single-family homes in flood hazard areas are in the South.

FEMA manages federal response and recovery efforts following any national incident. FEMA also initiates mitigation activities, works with state and local emergency managers, and manages the National Flood Insurance Program. FEMA became part of the U.S. Department of Homeland Security on March 1, 2003

Last Modified: Monday, 24-Apr-2006 11:37:19