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Currently showing: Climate/natural disasters > Floods/storms

13 Oct 16 15:45

When a disaster happens, how much money can you expect from FEMA? You may be surprised.

Thousands of people affected by the Louisiana flooding in August of 2016 are applying for federal assistance from the Federal Emergency Management Agency (FEMA). The actual numbers are still unfolding. Presumably, many did not have flood insurance through the National Flood Insurance Program (NFIP). Although FEMA can provide aid to help disaster victims to the value of $33,000 per household, which is an increase from $25,000 from recent years, the actual grant given is often far less than $33,000. According to an analysis by The Advocate of payouts in a dozen recent high-profile disasters, grants are averaging at a surprisingly low $8,000 or less per household.

Generally, FEMA tries to keep expectations very low. The program was never designed to make disaster victims whole or to rebuild ruined homes. According to FEMA, 70-80 percent of the program payout in recent major disaster went towards short-term assistance for rental and basic repairs to homes to make them habitable. The remainder of the payouts cover destroyed personal items such as beds, basic appliances and furniture. Devastated residents are left wondering how to rebuild their lives with a check for just a few thousand dollars. 

In Louisiana, a huge percentage of those afflicted by the recent floods do not have flood insurance. According to FEMA, approximately 45% of homeowners in high-hazard flood zones have flood insurance. In areas where flooding risk is considered low to moderate, only about 12% buy insurance. Where flooding is considered a high hazard, insurance is required by your mortgage company; however, those who own a home outright are not required to buy a flood policy. There is a pre-conceived notion that in the event of a disaster, the government will step in to assist. While this may be true to an extent, the onus is on the individual to have adequate protection in place.

As a matter of fact, if it can rain, it can flood. In the last five years, floods have affected all 50 states. About 20% of all flood claims come from areas that are considered to be at low risk. Homeowners insurance policies won't cover damages caused by hurricanes, melting snow, storm-swollen river, torrential rainfall or other flood-inducing conditions. In addition to these factors, area history and rainfall patterns are part of determining your risk level, other factors like land development, flood control measures in other areas, river flow changes and storm surge can increase the risk level in your community. Therefore, your safest bet is to have flood insurance. As you can see from the historical payouts, help from the government is minimal, and as such, homeowners should make every possible effort to protect themselves by purchasing flood insurance.

The average residential flood insurance premium is $700 a year, according to NFIP, which provides coverage up to $250,000 for the dwelling and up to $100,000 for personal property. $700 per year is a small price to pay for the added security. Don't risk it, floods can occur anywhere. Before the risk becomes a reality, get covered.

Category: Climate/natural disasters: Floods/storms


Alex Kaplan - 17 Oct 2016, 7:10 p.m.

Nice piece. This just looks at the emergency funding for individual assistance, however you can't discount the dozens of other federal programs, such as Community Development Block Grants, which doles out billions of dollars to communities for each disaster or the SBA interest free loans that homeowners can take. There are numerous reaons why the insurance tak-up rate is so low and government-subsidized reconstruction is a major contributor.

Raghuveer Vinukollu - 19 Oct 2016, 7:43 a.m.

Very informative post!

Federal disaster assistance is offered only when a community is declared as a Federal disaster area. According to FEMA, federal disaster assistance declarations are issued for less than 50% of the flooding events.

And if the assistance is in the form of a loan, the monthly payments for these federal disaster loans could be much higher than the average monthly premium for an NFIP policy. Finally, the beneficiary of the Federal disaster assistance must purchase flood insurance to be eligible in the future for any Federal disaster relief.

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