Home Insurance Disaster Facing Millions

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.

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.

In response to a request for comment from Newsweek, a spokesperson for FEMA said in a written statement: "FEMA is committed to working with local communities to update their flood maps as this is an ongoing process—approximately 1,500 map revision requests are submitted to FEMA each year. While FEMA is required to re-evaluate all flood hazard studies at least once every five years, communities can request changes to flood maps at any time. The Community Status Book at fema.gov is a tool to see effective dates of flood maps from around the nation."

They added: "On average, 40 percent of National Flood Insurance Program (NFIP) claims occur outside the high-risk flood areas. This is because FEMA flood maps are snapshots in time of risk and are designed to show minimum standards for floodplain management and the highest risk areas for flood insurance. They're designed to show minimum standards for floodplain management and the highest risk areas for flood insurance.

"It's important for everyone to remember that where it can rain, it can flood. Flood insurance provides residents with the necessary protection in order to rebuild after a flood."

In an additional comment to Newsweek, David Maurstad, senior executive of the National Flood Insurance Program, said: "It is important to recognize that Flood Insurance Rate Maps are snapshots in time. They're designed to show minimum standards for floodplain management and the highest flood risk areas for mandatory flood insurance requirements.

"They are not predictions of where it will flood, and they don't show where it has flooded in the past. The National Flood Insurance Program typically experiences growth in years following large flooding events and decline in years without large events.

"Although 98 percent of U.S. counties have experienced a flooding event, many Americans simply don't believe it will happen to them."

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.

Update 2/15/24, 6:50 a.m. ET: This article was updated to include comments from a FEMA spokesperson.

Update 2/15/24, 11:10 a.m. ET: This article was updated to include comments from David Maurstad, senior executive of the National Flood Insurance Program.