After the Deluge

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Many homes, businesses find they lack flood coverage

After the initial anguish subsides over the destruction wrought by Hurricane Sandy, many storm victims will face another shock: Their homeowner's policies may not cover the damage to their homes.

Mortgage lenders require homeowners on the coast and on floodplains near other bodies of water to buy "http://www.moral/buyonline//#"> insurance. Because private insurers dropped this type of coverage from homeowner policies in the 1960s, Congress created the "http:// /blog click here Flood Insurance Program (NFIP), which is run by the Federal Emergency Management Agency.

Insurance companies and independent agents sell the policies, but the federal " //#here">here underwrites the coverage.

"It is very hard to tell you how many people should have flood insurance and do not," said Diane Ifkovic of the state’s Department of Energy & Environmental Protection. "I can definitely say that not everyone in the floodplain carries flood insurance."

There are about 41,000 flood insurance policyholders in Connecticut.

But Ifkovic said many of those living in floodplains let their policies lapse after they pay off their mortgages.

"I was at the Milford Recovery Fair on Saturday, and there were a few homeowners where this occurred. They had paid off their mortgage, let the insurance lapse and had absolutely no flood coverage," she said.

According to National Flood Insurance Program, the average flood insurance premium costs less than $570 a year. But policies covering expensive beachfront property can cost substantially more.

That expense is a deterrent for many people who aren't required by their mortgage lenders to buy the insurance.

FEMA Administrator Craig Fugate said he doesn't know how many home and business owners sustained uninsured flood losses when Sandy's winds pushed water inland, but he's concerned that many don't have flood coverage.

A Wall Street Journal analysis found that cities in Connecticut have relatively low percentages of housing covered by the federal flood insurance program: six percent in Norwalk, 12 percent in Fairfield and 13 percent in Westport.

Catherine Smith, the head of the state’s Department of Economic & Community Development, said it's too early to tell how many Connecticut businesses impacted by the storm lack flood coverage.

"We haven't seen a huge flood of businesses coming to us yet, but it's definitely going to be an issue," Smith said.

In July, Congress reauthorized the NFIP program for five years and reformed it by increasing premiums and phasing out subsidies for second homes and repeatedly flooded properties.

But insurers who have written flood policies are concerned there isn't enough money in the program to cover everyone with flood policies who will make Sandy claims.

FEMA has about $920 million in its flood insurance account, and another $2.9 billion left in borrowing authority from the U.S. Treasury. That means the flood insurance program can pay out about $3.8 billion in claims.

The Consumer Federation of America estimates Sandy will lead to 200,000 flood insurance claims, exhausting the NFIP. That means even those who have bought flood insurance may not receive full payouts unless Congress acts to appropriate more money.


— Ana Radelat

This article originally appeared in

Should Connecticut Give Special Incentives to Individual Companies?

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