Home Insurance Disaster Facing Millions

An aerial view of homes in a housing development on September 08, 2023 in Santa Clarita, California.

Despite the growing risk of extreme weather events due to climate change, only 3 percent of homes in the U.S. flood insurance, according to a new report.

The number of homes enrolled in a National Flood Insurance Program (NFIP) has actually dropped by 1 percent between 2022 and 2023, a study by LendingTree research site ValuePenguin.com found. This is despite the country reporting four flooding events last year, which caused damages for billions of dollars, according to data from the National Oceanic and Atmospheric Administration (NOAA).

These events included flooding in California between January and March 2023, in Fort Lauderdale between April 12 and 13, in the Northeastern states between July 9 and 15 and on the East Coast between December 16 and 18.

The impact of climate change is expected to increase the frequency and severity of extreme weather events like heavy rains and flooding. The number of flood-prone areas in the U.S. is expected to grow by nearly 50 percent by the end of the century, ValuePenguin.com wrote—which could in turn significantly bring up flood damage claims.

In the past two years, flood damages have already reached $36,000 on average for impacted homes, as per NFIP claims compiled by ValuePenguin.com. According to the Federal Emergency Management Agency (FEMA), a single inch of rainwater can cause $25,000 in home damages.

Then why are American homeowners not getting flood insurance?

One key reason is that flood insurance is only required for homeowners with federally backed mortgages who live in special flood hazard areas (SFHAs). Adding another, optional costly policy on top of their standard home insurance can be less than appealing for most people who are already paying higher premiums than they were a couple of years ago.

According to the report by ValuePenguin.com, FEMA’s addition in 2021 of new flood risk variables—including flood frequency, flood type and property characteristics into calculating flood insurance premiums—caused rates to shoot up in the past two years for 77 percent of policyholders.

Newsweek contacted FEMA for comment by email on Wednesday morning.

ValuePenguin.com’s researchers also blamed FEMA for failing to update its flood maps often enough to make them relevant and “reflect intense rainfall events or sea level rise.”

“Since the flood mapping process is time-consuming, research-intensive and expensive, only 61 percent of the continental U.S. has been flood mapped—leaving thousands of communities vulnerable,” the company writes. “In fact, University of North Carolina researchers found a high probability of flood damage for over 1 million square miles in the U.S.—4.5X more than FEMA estimates,” it added.

According to ValuePenguin.com’s report, only 3.3 percent of U.S. households have NFIP flood insurance, while in 26 states the number goes below 1.0 percent.

A general lack of flood insurance across the U.S. already turned into a nightmare this year in California, which was hit by historic, deadly storms earlier this month. Less than 1 percent of the 7.7 million households in the Southern California counties affected by the storms can make damage claims.

Related Articles

Start your unlimited Newsweek trial