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Homeowners insurance and flood cover

One of the major problems for homeowners is that, over the last fifty years, we been building more and more of our homes on the flood plains. This always was a mistake of catastrophic proportions, but now that climate change is accelerating and more rain is falling in concentrated bursts (which does, at least, make up for the drought conditions at other times), the chances you will be flooded have now risen significantly. Although some efforts have been made to improve flood defenses with the building and strengthening of levees, these are too little, too late. Adequate protection should have a priority over the decades but, with big government thought a bad thing, funding for national flood prevention was never going to get finance. The results are now obvious to all. The private insurers have begun to refuse all cover for flood damage. This leaves states and the National Flood Insurance Program offered through FEMA as the insurers of last resort. Except the interpretation of certain key terms is providing a real problem in deciding whether the cover is comprehensive.

To understand the problem, let's go down to the Florida Keys. Most of the Keys is considered a high-risk flood area. Now consider the effects of the hurricane season which rolls around every year. Is the damage from a hurricane more likely to be "windstorm" or does most of the damage come from the effect of the wind to create tidal surges which flood the land? If it's the former, then the liability to pay would fall on the private homeowners insurance companies. But if a tidal surge creates a flood, the liability would fall on the state or federal flood programs. This may look like a battle over the meaning of words without real significance to policyholders, but it's actually fundamental. If the wind strength during a storm is sufficient to drive seawater onshore, why is this not windstorm damage? The answer is the profit margin of the insurers. The more money the companies can rake in as premium and not pay out the better. The companies salve their consciences by pointing out claims can be made for flood damage but that rather misses the point. If this cover is excluded from the standard homeowners insurance policy, the premium rates should be lower.


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