Resiliency is a Rhyme, Not a Riddle

SpiderDo you remember bedtime nursery rhymes? Ones you heard as a kid, or perhaps the ones you’ve read to your kids a thousand times? 

How about:

The itsy-bitsy spider crawled up the waterspout.

Down came the rain and washed the spider out. 

Out came the sun, and dried up all the rain, 

And the itsy-bitsy spider went up the spout again.

The rhyme has a happy ending because the spider was able to be resilient. Perhaps there is a lesson for us all hidden within this popular nursery rhyme. Maybe the spider was able to climb back up because it had understood the risks of where it lived and had properly prepared to ensure its recovery in the event of rain.

Gilbert F. White didn’t write nursery rhymes, but he did write a doctoral dissertation on the impacts of flooding back in 1942, six years before the itsy-bitsy spider ever had its tale of resiliency spun into folklore. White is notable for saying, “Floods are acts of God, but flood losses are largely acts of man.” And while man has yet to figure out a good way to control when and where floodwaters rapidly rise, we have figured out at least one step we can take to be resilient after a flood: purchasing flood insurance.

Flooding happens in every U.S. state and territory. Changing runoff patterns from new construction, a weather event such as a hurricane, a strong storm or large amounts of melting snow, even poorly maintained drainage systems, or a broken water main can all result in flooding.

In a recent survey conducted by the NAIC, out of the nearly 2,500 home or property owners questioned, over half of them mistakenly assume that their standard insurance policy will cover water damage in the event of a flood. But flood is not covered in a standard rental, home, or business insurance policy. Only a flood insurance policy from the National Flood Insurance Program (NFIP) or one bought through the private flood insurance market will cover the financial devastation of a flood.  

The Federal Emergency Management Agency (FEMA) calculates the risk of flooding across the U.S. Recent findings show that people who live in high-risk flood areas have a 25% chance of experiencing a flood over the course of 30 years – which is the average span of a mortgage. 

The NAIC survey found that 75% of participants believe extreme weather events are happening more frequently due to the changing climate, and 41% see this increase impacting them with a future loss. But even with the increasing risk of flooding, the percentage of consumers signing up for flood insurance remains low. 

“It’s too costly.” 

“I don’t live in a high-risk area.” 

“I don’t need it, FEMA will help me,” are all common responses to the suggestion of flood insurance. 

But flood insurance is a good idea because if – or more likely when – a flood event happens, your flood insurance premium will be a drop in the bucket compared to what it will cost to rebuild your life. When weighing the potential cost against the policy premium, consider that just one inch of water can cause up to $25,000 worth of damage, according to FEMA

That’s just one inch. What if your house or business is destroyed by floodwaters? You may find it hard to rebuild. Only 40% of businesses reopen after being impacted by a flood if they lack flood insurance, FEMA reports. Flood insurance premiums vary depending on the construction date and the flood risk of the property, but the price of not having flood coverage will cost you greatly, both emotionally and financially. 

Checking where your property is on the FEMA flood maps is a good first step in evaluating what your risks are. These maps change as risks shift, so just because you weren’t in a flood zone when you built your home or business doesn’t mean you aren’t in one now. Even if you’re not located in a high-risk flood zone, you shouldn’t ignore the importance of flood insurance. From 2014 to 2018, more than 40% of all NFIP flood insurance claims came from outside of high-risk flood zones. Still, some consumers dismiss their risks. 

There's a saying here a the SCDOI, "If it rains at your house, you're at risk for flood." And while that is very true, the fact is that for a standard 30-year mortgage, you’re 27 times more likely to suffer from flood damage than you are from fire damage, no matter where you live. 

Some consumers dismiss flood insurance because they believe that, in the event of a disaster, FEMA will help them recover. FEMA’s disaster assistance is only made available when the President of the U.S. makes a disaster declaration. Unfortunately for property owners, most localized floods don’t result in a disaster declaration. In the event one is declared, FEMA grants are there to assist you, but they are not intended to make you whole. 

Remember how it can cost up to $25,000 to recover from just one inch of water? In 2017, when Hurricane Harvey slammed into the coast of Texas and Louisiana, the average FEMA grant payout was only $4,300 compared to the average payout of $116,800 from the NFIP to flood insurance policyholders. So while the FEMA grants were helpful, they ultimately only covered a small portion of homeowners’ flood-associated costs. 

The only true way to be confident that you can be resilient after a flood is through purchasing flood insurance. Insured consumers recover faster than their uninsured neighbors. It’s as simple and as important as that. 

Resiliency doesn’t have to be a riddle, it can be a straightforward plan of action. Assess your risks by checking the FEMA flood maps, review your insurance and financial information, and then talk to a trusted insurance agent or company about what purchasing flood insurance could look like for you. You can then rest easy knowing that when the rains have passed and the sun has come out, you too will be able to climb back up, just like the resilient, itsy-bitsy spider.