Florida’s homeowners shell out thousands, even tens of thousands, for property insurance to protect themselves from fierce storms like Hurricane Ian.
But tens of thousands of people walloped by the Category 4 storm in September are now discovering that they didn’t have the coverage they needed for one of the biggest impacts of the storm — flood insurance.
It’s one of the hardest — and most expensive — lessons from hurricane season 2022, which officially drew to a close Wednesday.
Florida’s home insurance market has been troubled for decades, but experts worry that the back-to-back strikes from hurricanes Ian and Nicole could be enough to tilt the teetering market for wind damage insurance into another collapse. Gov. Ron DeSantis has hinted at holding another special session on the topic soon, but it’s not clear if legislators will even try to address the already skyrocketing costs of private insurance and increasing risk load of the state-run option, the Citizens Property Insurance Co.
And even if they do, coverage for Florida’s most common risk — flooding — won’t be on the table for discussion.
Flood insurance is almost entirely run by the federal government, which sets strict rules and price caps on who needs to have it and how much it costs. Experts say that despite the government’s efforts to make flood insurance cheap and available, Florida faces a massive coverage gap that could grow even larger as the state’s population — and flood risks — grow and the number of policies slowly declines.
By one estimate, flood damage could make up half of the total Hurricane Ian losses in Florida. The Category 4 storm tore into Southwest Florida in late September, battering Fort Myers and other areas with two-story storm surge and fierce winds.
But it was the slow creep north through the rest of the state, when the much weaker storm dumped more than a foot of rain, that shocked inland residents.
Low-lying areas quickly flooded, leaving some apartment complexes with an entire story underwater. Officials had to rescue more than a hundred residents trapped in their homes and cars. The Peace River, in Southwest Florida, swelled from 130 feet wide to nearly a mile wide.
And when the floodwaters eventually receded, many Floridians in the path of Ian — and then Nicole — found they weren’t covered for the damages.
Only about 18% of homes in Florida counties that were under evacuation orders from Hurricane Ian had a federal flood insurance policy, according to an analysis by risk management firm Milliman. In inland counties, those figures drop even further.
Compare Lee County, where Ian made landfall, to Seminole County, north of Orlando. In Lee, about 51% of properties inside flood zones have flood insurance. In Seminole, only 37% do. In either case, that leaves thousands uninsured for flooding damage outside the coverage of most homeowner and windstorm policies. Claims will likely be rejected.
“People just expect to be protected and it’s very distressing and upsetting for them to find out they paid the premiums and don’t have the coverage they need,” said Nancy Watkins, a principal and consulting actuary with Milliman. “Often the reason they don’t have a flood insurance policy is they mistakenly think that their homeowner policy would cover that.”
Few home insurance policies cover flood damage. Instead, almost all flood insurance policies in the nation are through the FEMA-run National Flood Insurance Program, which insures 1.7 million Floridians. The state actually has the highest number of flood policies under the federal program, but hurricane season 2022 was a sobering reminder of how many people don’t have it.
An early estimate by CoreLogic, a property information and analytics firm, suggested that half of the flood damage Florida saw from Ian could be uninsured.
Tom Larsen, CoreLogic’s vice president of hazard and risk mitigation, said his firm also found Ian’s damage in Florida extended outside FEMA’s flood zones.
“We saw more damage outside those zones than in,” Larsen said. “It doesn’t take much water to cause a lot of damage.”
How much damage did the hurricanes do?
Florida’s Office of Insurance Regulation has tallied nearly $10 billion in total losses from Hurricane Ian so far. That includes losses to homes, commercial properties and private flood insurance claims.
Initial estimates from FEMA suggest the federal flood insurance program, which insures the vast majority of Floridians with flood policies, could see $3.5 billion to $5.3 billion in losses from all five states hit by Ian, with the majority of those claims coming from Florida.
Florida’s relatively small private flood insurance market, with just under 100,000 policies as of late 2021, also took a hit.
Trevor Burgess, CEO of Neptune Flood, said his firm has about a third of Florida’s policies. He ranked Ian as the most expensive storm the firm has dealt with since it started five years ago but didn’t offer a dollar figure estimate.
“Ian will be our largest claim event after Ida last year,” he said. “Having them year after year is consequential.”
For Hurricane Nicole, Florida’s total property losses are slimmer but still significant at just under $400 million.
What does flood insurance cover?
For the lucky few that had the proper insurance to match their hurricane-borne flood damage, there’s cash from FEMA on the line in at least a few ways.
As of mid-November, FEMA said more than 40,000 Floridians have filed Ian-related flood damage claims. They’re likely to get some help patching up their homes, but it likely won’t cover a full replacement. The NFIP, like many of the private flood offerings, is capped at $250,000 of coverage.
The picture is worse for those without flood insurance.
“An inch of water in your house can easily be a $25,000 expense,” said Watkins.
Uninsured people will have to raid their savings or hope for help from charities or state and county grants. Federal grants are not an option. FEMA reserves its grant programs for fixes like home elevation or floodproofing for those with active flood insurance policies.
FEMA disaster relief for uninsured properties is usually capped at around $10,000, Watkins said, and it can take a very long time to materialize in people’s bank accounts.
Flood insurance numbers dropping
Yet despite the growing risk of flooding — which Watkins says is the most common disaster facing Floridians — the Sunshine State has fewer and fewer residents with flood insurance every year.
Burgess, with Neptune, said his firm produced data showing that 18% of Florida buildings had flood insurance five years ago, and today that figure stands at 15%.
“That’s going in the wrong direction. We need many many more people to buy flood insurance to be protected from this peril,” he said.
That’s a tough sell in Florida, even considering that sea level rise is making nuisance flooding more common and more intense.
The biggest reason is likely that flood insurance, unlike property insurance, isn’t mandatory for most homes. Any home purchased with a mortgage is required to have property insurance, but mortgage-purchased homes are only required to have flood insurance if they’re within a designated FEMA flood zone.
And even then, research shows that many of the properties required by their lenders to hold flood insurance policies drop them with no consequences.
A recent revamp of the federal flood program, known as Risk Rating 2.0, aims to get more people insured at market rate premiums, a move that could help the NFIP dig itself out of its $20 billion debt hole.
For Joel Scata, an attorney with the Natural Resources Defense Council’s water and climate team, the flood damage from Hurricane Ian is another indication that the federal program needs to be reformed to encourage people to live farther away from risky areas.
“Floods, in general, are becoming more frequent, both inland and on the coast, because of sea level rise and intense rainstorms,” he said. “The NFIP has the opportunity to be a linchpin in the U.S. approach to mitigating flood risk in regards to climate change.”
Average flood insurance premiums are around $600 a year in Florida, according to data collected by Forbes. That makes Florida one of the cheapest states in the nation for flood insurance, despite home and windstorm insurance premiums that are some of the highest in the nation at more than $4,000 a year.
“People don’t want to pay more money to buy more coverage that they don’t have now,” Watkins said. “But you don’t find out you need it until it’s too late.”
