Deep Impact of Flood Insurance

Ahead of a vote to keep the NFIP from lapsing, a Houston real estate broker details his struggle to recover from Hurricane Harvey.

While broker Ed Wolff helps his Houston clients through the daunting cleanup after Hurricane Harvey, he’s also trying to save his own home. Three feet of floodwater inundated his ranch-style five-bedroom house during the August storm, but he finds himself in a relatively lucky position. His home—unlike two-thirds of those affected around Houston—is covered through the National Flood Insurance Program. It’s also the third time in three years he’s been flooded, though Harvey caused the most severe damage.

“Every single lower cabinet has to be removed,” says Wolff, AHWD, president of Beth Wolff, REALTORS®. “We have to replace five feet of Sheetrock, all the bathroom floors—it’s a mess. I’ll probably get the maximum flood insurance payout of $250,000. Imagine what I’d be facing if I weren’t covered.”

Unfortunately, large numbers of uninsured Houston-area residents, as well as those in Florida, Puerto Rico, and other devastated areas, are facing bleak prospects for repairing or rebuilding their homes. Especially vulnerable are those who reside in areas outside of designated flood zones, which are increasingly affected by extreme weather.

Stronger storms are bringing more widespread devastation, yet a long-term reauthorization of the NFIP remains in limbo. In September, Congress extended the program, which provides flood insurance policies to 5 million property owners, through Dec. 8. But such a short-term fix gives little certainty to owners who may lose access to any insurance option if the NFIP lapses. A growing number of private insurers are offering flood policies, but not in every state.

Wolff emphasized the importance of extending the program for the long term. “Ten percent of our property tax roll flooded,” he says of greater Houston. “Imagine a Houston market without an option for flood insurance—there wouldn’t be a market anymore.”

Austin Perez, senior policy representative for insurance issues at the National Association of REALTORS®, says NAR’s priority is to secure a five-year reauthorization of the NFIP. The bill NAR supports, known as the 21st Century Flood Reform Act, also would provide money to help homeowners mitigate flood risk, limit insurance premium hikes, and improve flood mapping, among other measures. “The main hurdle to passage is time,” Perez says. “Congress has a lot to do between now and Dec. 8, including tackling the federal budget. So it’s really important to keep up the pressure.”

Flood mapping could be central to future NFIP reform, as both Harvey and Hurricane Irma—which clobbered Florida’s western coast in early September—exposed many homes outside federally recognized flood zones to damage, Perez notes. Indeed, of the more than 180,000 Houston-area properties flooded by Harvey, only 15 percent were covered by a flood insurance policy either privately or through the NFIP, according to news reports citing NFIP data. Homeowners outside flood zones or who don’t have federally backed mortgages aren’t required to purchase flood insurance.

But Harvey’s historic 50-inch rainfall over Houston may help bolster legislative support for broader insurance coverage. “I can’t think of many places in the United States that could absorb that much water,” Perez says. He’s hopeful that flood maps will be updated.

Wolff, who is renting an apartment with his family while their home repairs are underway, says too many Houston residents were unprepared for Harvey’s destruction. Weeks after the storm, some owners, unable to afford repairs, were offering to sell their properties as is. Even in his own neighborhood, which was designated as a flood zone after it began flooding for the first time ever three years ago, some have abandoned their homes.

Now faced with the option of either elevating his own home above flood level or tearing it down and building new, Wolff says he will likely have to apply for a disaster loan from the Small Business Administration to cover expenses that his insurance won’t. He pays $2,200 annually for flood insurance. “It’s helpful, but I’m still probably going to take a 10 percent loss,” he says. Many owners would not be able to withstand such a financial hit.

But Wolff chooses to remain positive, saying his family has been through harder challenges. His daughter, Tenley, now 12, nearly died from heart complications as an infant. His wife, Katy, is in remission after treatment for a brain tumor. “This gives you a different perspective on life,” he says. “We’re alive, and we’re together. We love our city, our friends, and our neighbors. That’s all that matters. I feel confident that we’ll all get back to whole.”

Technology Speeds Up Claims Process

Insurers are employing new technologies to help disaster victims file claims faster and get financial assistance sooner. Wright Flood, a national insurance carrier providing flood policies backed by the Federal Emergency Management Agency—which administers the NFIP—recently launched a tool enabling policyholders to file claims by text, in addition to the existing options of making claims online or by phone or mail. Customers can text photos and receipts for damaged belongings directly to a claims adjuster. “Text messaging can be a lifesaver in terms of getting claims started when power is out,” says Jeff Nichols, a claims supervisor for Wright Flood. Serendipitously, the feature became available as Harvey bore down on Texas in late August. Nichols hopes that mainstreaming the claims process in this way will encourage more people to purchase flood insurance.