Hurricane-battered states lead in payouts from National Flood Insurance Program

John Egan

Since 1978, the National Flood Insurance Program has paid more than $38 billion in claims to flood victims. Thanks primarily to Hurricane Katrina in 2005, more than 40 percent of that money has gone to one state: Louisiana.

Flood victims in Louisiana have been paid more than $16 billion in insurance claims from the program since 1978. According to the Federal Emergency Management Agency (FEMA), which runs the flood insurance program, nearly $13.3 billion of those claims were paid to victims of Hurricane Katrina. In all of the states affected by Hurricane Katrina, flood insurance claims added up to nearly $16.2 billion, FEMA says. (Story continued below map.)

Top states for flood insurance payouts

Behind Louisiana in the total dollar amount of claims from the National Flood Insurance Program is Texas. From January 1978 through March 2011, Texans received nearly $5.5 billion in payouts from the program, according to FEMA.

After Louisiana and Texas were:

3. Florida — $3.6 billion.
4. Mississippi — $2.9 billion.
5. New Jersey — $971 million.
6. Alabama — $943 million.
7. North Carolina — $797 million.
8. Pennsylvania — $773 million.
9. New York — $672 billion.
10. Missouri — $568 million.

Top states for flood insurance policies

While Louisiana leads all states for flood insurance claims, Florida takes the top spot for the number of National Flood Insurance Program policies that are in effect. As of March 31, 2011, Floridians had nearly 2.1 million flood insurance policies. Florida was followed by Texas, with more than 670,000 policies.

Next in line were:

3. Louisiana — Nearly 482,000.
4. California — More than 267,000.
5. New Jersey — Nearly 230,000.
6. South Carolina — More than 201,000.
7. New York — Nearly 163,000.
8. North Carolina — Nearly 136,000.
9. Virginia — Nearly 111,000.
10. Georgia — Nearly 97,000.

In all, more than 5.6 million National Flood Insurance Program policies provide more than $1.2 trillion in coverage, according to FEMA.

Average high-risk policy: $2,600 a year

Home insurance policies typically exclude flooding, meaning homeowners must turn to the National Flood Insurance Program for such coverage. Flood insurance rates are based on the risk of a property being flooded, the age of the insured structure and the elevation of the building.

Historically, the private insurance market has viewed flood risk as “either uninsurable or prohibitively expensive,” FEMA Administrator Craig Fugate says.

According to FEMA, the average annual premium for a standard flood insurance policy in an area with low to moderate flood risk is $1,489 a year. The average premium for a standard policy in a high-risk flood zone is $2,633 a year. By comparison, the average U.S. homeowner’s owner policy — which doesn’t cover flooding — costs roughly $800 a year.

U.S. Sen. Mike Johanns, R-Neb., says that unless the typical homeowner is advised it’s necessary, he or she won’t buy flood insurance. Johanns says: “The average person would look at this cost of this and say, ‘Why would I?’”

FEMA says up to 30 percent of all flood insurance claims paid by the National Flood Insurance Program are for property in areas with low to moderate flood risks. In areas with a high risk of flooding, there’s a 26 percent chance of a home being flooded over the course of a 30-year mortgage.

Reform on the way?

Floodwaters swamped New Orleans after Hurricane Katrina struck in 2005.

U.S. Rep. Judy Biggert, R-Ill., is chairwoman of the House panel that oversees the National Flood Insurance Program. She says the program must be put “back on stable financial footing so that it can provide homeowners with reliable coverage without putting taxpayers on the line for billions in losses.”

As of mid-2011, the National Flood Insurance Program was swimming in debt of nearly $18 billion.

A legislative overhaul that’s pending in Congress would give the program long-term stability, draw better flood maps and initiate insurance pricing that better matches flood risks, Biggert says in a statement. Biggert’s overhaul legislation also would extend the flood insurance program, which is set to expire Sept. 30, 2011.

“This program is too important to let lapse and too in debt to continue without reform,” Biggert says.

At a U.S. Senate Banking committee hearing June 9, 2011, Sen. David Vitter, R-La., said the flood insurance program shouldn’t be extended every few years, as is typically done, but should go through a “full-blown, long-term reauthorization.”

Fugate, the FEMA administrator, says the flood insurance program “must continue to offer affordable insurance that will properly identify those properties at risk and provide them adequate coverage, while reducing the need for taxpayer-financed disaster assistance.”

U.S. Rep. Candice Miller, R-Mich., wants to eliminate the National Flood Insurance Program. She says Michigan and other states are weighed down by an imbalance between what residents pay into the program and what they receive from it. Since 1978, residents of Michigan have received more than $45 million in payouts from the flood insurance program.

“Michigan has been turned into an ATM machine — forced to pay for the flood risks that our state does not actually face,” Miller says in a statement.