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2-Minute Law School: Flood Insurance

Hi. Professor Albert here for this week’s edition of THELAW.TV’s 2-Minute Law School. This week, in the wake of Hurricane Sandy, we’re going to visit flood insurance.

Nationwide, only 20 percent of American homes that are at risk for floods are covered by flood insurance. Most private insurers do not insure against the peril of flooding. In certain flood-prone areas, the federal government requires flood insurance to secure mortgage loans backed by federal agencies. The National Association of Insurance Commissioners found that 33 percent of U.S. heads of household still hold the false belief that flood damage is covered by a standard homeowners policy.

Congress created the National Flood Insurance Program in 1968 to provide a means for property owners to financially protect themselves from floods. The N.F.I.P. offers flood insurance to homeowners, renters, and business owners if their community participates in the N.F.I.P. According to the N.F.I.P., a six-inch flood can cause upwards of 20-thousand dollars in damages to a one-thousand square foot home.

Currently, the N.F.I.P. has a 20.8 billion dollar cap in the amount of money it can borrow from the U.S. Treasury to pay flood loss claims. Eighteen billion was borrowed in 2005 five to pay for Hurricane Katrina damages. According to the Federal Emergency Management Agency, only four billion dollars remain in borrowing authority, a number far smaller than the expected damagers from Hurricane Sandy.

Even if you live in an area that has never been flooded, low risk areas can flooding just as easily as a high risk area. People outside of high risk areas file over twenty percent of N.F.I.P. claims and receive one-third of disaster assistance for flooding. When it’s available, disaster assistance is typically a loan you must repay with interest.

If you have questions about insurance law, watch hundreds of local attorneys answer thousands of legal questions on video, or consult with one of the featured lawyers. Online at THELAW.TV.

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