The Federal Emergency Management Agency warns that just one inch of water can cause $25,000 of damage to a home. (Courtesy of FEMA)
DJ Bettencourt most frequently hears from consumers that flood insurance is “expensive.” And while that may be unequivocally true for some households, the deputy commissioner at the New Hampshire Department of Insurance is trying to reframe that thinking, and urgently so.
The average annual cost of flood insurance in the state is a little over $1,000, or around $92 a month, according to Insurify, though numbers vary depending on a home’s location and the structure itself.
In contrast, Bettencourt shares with consumers another statistic.
“According to FEMA, as little as one inch of flood water can cause up to $25,000 in damage,” he said. “And therefore I think it puts that cost for flood insurance into important perspective.”
He often asks people: If you lost everything in a flood, would you have the financial resources to start over completely?
Contact the Department of Insurance’s Consumer Services:
Officials at the New Hampshire Department of Insurance are urging property owners to take a look at flood insurance as the potential for risk becomes more unpredictable. Standard homeowner’s insurance doesn’t cover flood events or water damage, meaning people need to obtain separate flood insurance coverage.
Bettencourt said he’s had some of the most difficult conversations of his tenure over the last few weeks, following heavy rains and flash floods that rocked communities in the southwestern part of the state.
“We have heard from residents who have suffered severe damage to their homes or lost their homes entirely, facing the prospect of having to rebuild their lives with no coverage from their insurance carrier,” he said during a webinar last week.
With climate change making extreme rainfall less predictable and more volatile, many areas experiencing flooding aren’t the ones that have historically been concerned in the past.
Flooding is New Hampshire’s most common and costly disaster, according to the Department of Environmental Services. In July 2017, when storms dumped more than an inch of rain per hour and a major disaster was declared for Grafton County, state officials estimated the damage at more than $11.3 billion.
According to the Federal Emergency Management Agency, in 2021 there were about 7,700 National Flood Insurance Program policies in place in New Hampshire – less than 2 percent of residential homes in the state. Those numbers don’t include commercially insured properties or flood insurance purchased on the private market.
Here are three major takeaways from the state Department of Insurance on flood insurance and preparedness:
Look at your current homeowner’s insurance policy
James Fox, property and casualty director for the Department of Insurance, encouraged homeowners to understand the inclusions and exclusions of their current homeowner’s insurance policy.
Standard homeowner’s insurance doesn’t cover flood-related damages, but typically covers property damage caused by wind, hail, fire, and other perils. While there may be storm coverage for wind damage to shingles, for example, water damage from the same storm is often a major exclusion.
“If a water issue is likely to damage many, many homes, the insurance company is concerned about taking it on because they have solvency issues,” Fox said, noting typical homeowner’s insurance excludes water damage related to flooding, surface water, waves, tidal water, overflow from a body of water, and water driven by wind.
“So basically what they’re trying to say in as many ways possible is that they’re not gonna cover a flood,” he said.
National Flood Insurance Program vs. private insurance
Those interested in adding flood insurance coverage have two options: the National Flood Insurance Program or flood insurance through the private market.
The National Flood Insurance Program is a separate policy obtained either directly from FEMA or via “write your own” versions done by participating insurance companies. An NFIP policy covers up to $250,000 for the building and $100,000 for its contents.
Created in 1968 by the National Flood Insurance Act, the program serves 5 million policyholders nationwide. Those who obtain a policy through the NFIP typically do so voluntarily, though people living in homes with government-backed mortgages in high-risk flood areas, known as special flood hazard areas, are required to have insurance through either private companies or the NFIP.
Last year, FEMA made major changes to the NFIP’s methodology, essentially recalibrating premiums to be representative of a structure’s actuarial flood risk. Prior, there were major disparities, because FEMA charged premiums based on the amount of insurance purchased for a home rather than its replacement cost.
And while FEMA says the new rating system is “equity in action,” as it’s correcting decades of miscalculated flood risk, 10 states are suing the federal government because of the changes, which for many policyholders are resulting in dramatic increases.
For some homeowners, coverage through the NFIP may not be adequate. Fox said those with more expensive homes often think, “$250,000, that’s not enough for me.” While the NFIP covers 90 percent of flood insurance issued in the country, there is a private flood insurance market where people can purchase higher amounts of dwelling coverage, up to $15 million in one case.
“If you have a higher-end house, you should probably look at private flood insurance and see what your options are,” Fox said.
Bettencourt said his department encourages all Granite Staters to use a “local independent insurance agent” to help them navigate the process and determine the best coverage options.
Be prepared: Home inventory apps, important documents
The Department of Insurance also urges people to take critical steps in preparation of a flood so they have a better chance at recouping any losses that occur.
Keith Nyhan, consumer services director, said people should document what’s in their home ahead of a storm, including furniture, electronics, appliances, clothing, and other valuable items. A room-to-room approach is recommended
“A home inventory app is absolutely critical as someone’s preparing for a flood,” he said. “And it’s a pretty simple process to download the app, walk through your home, record videos, take pictures.”
Nyhan said individuals should make sure all of their important documents are stored somewhere safe and at an off-site location, as well as uploaded digitally.
For more information, see the Department of Insurance’s flooding and storm information webpage for consumers.
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