The physical devastation wrought by Hurricane Harvey has been immense so far, but it won’t be until the floodwaters finally recede that the true extent of the damage done will be discovered. Many homeowners whose houses have been damaged by flooding will find that they will have to bear the burden of rebuilding, as they weren’t required to carry and didn’t choose to purchase flood insurance.
The US Congress formed the National Flood Insurance Program (NFIP) in 1968 to establish a government-administered flood insurance program for flood-prone areas, in an attempt to reduce the cost to the government of providing disaster assistance. In communities that have decided to participate in the NFIP, homebuyers who take out mortgages from federally-regulated or -insured mortgage lenders are required to purchase federal flood insurance on their homes if they live within an area deemed to have a 1-percent chance of flooding each year, also known as a 100-year floodplain. Those who aren’t required to purchase insurance are still able to purchase insurance if they want to.
Because flood insurance is expensive and has gotten more expensive due to recent rate hikes, many households who have been exempt from the insurance requirement have opted not to carry or renew flood insurance policies. Harris County, in which Houston is located, has 25,000 fewer households with flood insurance than it did five years ago. Other cities and counties around Houston have seen significant drops in flood insurance coverage as well, on the order of 20-25 percent over the past five years.
Because the flooding caused by Hurricane Harvey was so unprecedented and flooded areas with an 0.2 percent annual chance of flooding (500-year floodplain) and beyond, many thousands of homeowners will have to tackle the costs of rebuilding on their own. Whether they will choose to rebuild where they already are or whether they decide to move to less flood-prone areas, it will be interesting to see whether more households decide to purchase flood insurance in the aftermath of these catastrophic floods.
