Flood Insurance Gamble A Poor Bet 

Release Date: December 14, 2006
Release Number: 1668-037

» More Information on Louisiana Severe Storms and Flooding

ALEXANDRIA, La. -- Louisiana citizens 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 severe storms that began Oct. 16.

“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 Deputy Federal Coordinating Officer Rick Hinrichs. 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.

Deputy State Coordinating Officer Neal Fudge said that roughly 30 percent of Louisiana’s land mass lies in Special Flood Hazard Areas (SFHAs). He said there are slightly more than 450,000 structures located in the SFHAs.

“We’re pleased that the message has gotten through to almost half of our residents that need flood insurance the most, Fudge said. “ But, the job is only half done.”

Hinrichs 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 compensated 188,378 state homeowners and renters more than $13 billion for flood damage and loss claims.

“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 Hinrichs.

He said that more than 483,000 NFIP policies were currently in force throughout the state comprising total flood coverage of more than $83 billion. He added that nearly 120,000 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,” Hinrichs said. He noted that buildings constructed in compliance with the NFIP standards suffer 77 percent less flood damage than those built prior to local enforcement of these standards.

The NFIP is a self-supporting program. All claims and operating expenses are paid from policyholder premiums, not tax dollars. Furthermore, it is estimated that NFIP building standards prevent $1 billion in nationwide flood losses annually and reduce the burden of disaster relief costs on all taxpayers.

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 only for individuals with hearing or speech impairments (TTY/TDD) 800-427-5593.

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

Last Modified: Thursday, 14-Dec-2006 17:36:43