Hurricane Sandy Insurance Claims in Billions

Hurricane Sandy Property Damage in the Billions

The devastating effects of Hurricane Sandy are only just beginning to be felt. As with Hurricane Katrina, the dollar amount for all of the property damage is in the billions, and even though a home or property owner might have flood damage insurance through FEMA (Federal Emergency Management Agency), there simply isn’t enough money to reimburse all of the claims. And what about all of the home and property owners who didn’t have flood insurance?

FEMA May Have to Increase Federal Deficit in Order to Pay All Claims

In 2005, the Gulf Coast was ravaged, leaving thousands of homes leveled and tens of thousands of people homeless. The FEMA National Flood Insurance Program that insured a vast number of property owners takes in approximately $3.5 billion in premiums yearly, and when hurricanes Katrina, Rita and Wilma struck, more than $17 billion in damages were filed. In fact, flood insurance claims have surpassed insurance premiums for four out of the last five years, leaving the federal organization without the money for adequate payout. Hurricane Sandy is believed to have flooded or destroyed more than 100,000 homes. FEMA will very likely have to increase the federal deficit in order to pay out all of the claims and provide sufficient assistance. The vast majority of the properties with flood insurance coverage are covered by the federal-backed National Flood Insurance Program because private insurers either do not offer flood insurance or the premiums are prohibitively expensive in regions even marginally susceptible to flooding.

Flood Insurance Policies

How does the homeowner know if the damage is covered? There are numerous provisions in homeowner insurance policies, and determining whether or not a particular policy applies to a specific sort of damage can be quite confusing. The category of “flooding” might not even apply to many of the claimants. Properties that were damaged by winds or rain are not covered by flood insurance, nor are properties damaged by fallen trees due to ground oversaturation. However, most homeowners’ insurance will cover the damage done to a home from a fallen tree, unless it can be proven that the tree fell due to homeowner neglect; even if the tree was owned by someone other than the property owner who makes the claim. “Flooding” is defined as being an overflow from either tidal or inland waters, which then seep into the property from below, as opposed to leaking in from above. Standard-issue flood insurance policies cover the structure, electrical systems, plumbing systems, large appliances (refrigerators, ovens and water heaters) and carpeting. Supplementary insurance can be purchased for furnishings, clothing and electronics. Try not to keep items of value in basements; many flood insurance policies do not cover (or have limited coverage) items stored below ground.

Unfortunately, not every homeowner had flood insurance, since it isn’t required unless the homeowner has a federally-backed mortgage. Those without flood insurance can contact FEMA and apply for aid. However, assistance, if granted, is only a fraction of what an insurance policy would pay out.

Philanthropist Julian Omidi is cofounder of the charities No More Poverty and Animal Support with his brother Dr. Michael Omidi. In this article, Julian Omidi discusses insurance claims after Hurricane Sandy.