Hurricane Irene Teaches Flood Insurance Lesson

Hurricane Irene has passed.

The good news is the storm did not hit New York and New Jersey with the category 3 or 4 wind levels that we all feared; the bad news is that the majority of the $10 billion plus in damage will fall under the category of “flood”, which is typically excluded under homeowners policies. Much of the flood damage won’t be covered because few northeastern residents participate in the National Flood Insurance Program.

Why?  Because they never think it’s going to happen to them.  And because their mortgage lender didn’t require they do so.

Since the wind speeds were below estimates, only a small fraction of the losses occurred as a result of high winds, the majority of the damage came as a result of massive rainfall causing rivers to crest over 100 year highs, resulting in extensive wide-spread flooding. Experts say that with flooding the main culprit, a majority of items damaged will be not covered by insurance claims. This should be a wake-up-call to homeowners about the importance of having flood insurance.

Hurricane Irene, was not as strong as feared, and the quick planing of the Obama Administration, Mayor Bloomberg, and the governors of New York and New Jersey, helped keep the death-toll low. That said, we are still looking at a major event that has cost lives, and will have a substantial financial fallout for many months to come. Stores are closed, hotels filled with guests were forced to send them packing, restaurants missed days of business. This all takes place at the same time many of these same businesses find themselves with damages not covered under their property policies. After the drop in home values, homeowners, many of whom were underwater financially, now find themselves underwater literally .

It will take weeks to clean up the mess, and months before businesses and individuals fully assess the damage Hurricane Irene brought to the northeast.

Since South Florida was spared, take the time our northeastern neighbors are spending cleaning up to re-evaluate your flood insurance needs.