Many Floridians who suffered extensive flooding did not carry a separate flood insurance policy to cover the damage caused by the deadly storm. It’s left homeowners — and even renters — with a hefty and, possibly, life-changing expense that could decide whether they are rendered homeless.
Susan Cavanaugh and her two kids are living through that ordeal after the first floor of their home on Sanibel Island, where all three live and work, was engulfed by the storm surge. Cavanaugh did not have flood insurance coverage.
Now she doesn't know how to get her family back into their home without an insurance check to pay for contractors and building materials.
“I can only do so much as a single mom,” said Cavanaugh, who is staying in a motel and is unsure where to live next. “We just want to go back to the house. It’s been deemed structurally sound, but we have to get it back online and it’s not just a cosmetic issue. It’s going to take blood, sweat and tears and it’s going to take a lot of muscle and a lot of work to get there.”
Sanibel Island last month suffered a direct hit from the Category 4 storm and the surge of water, up to 15 feet in some places, it brought from the gulf into people’s homes. The community remains inaccessible by car, forcing many to pay boat captains to ferry them to begin the cleanup.
Cavanaugh is not alone in facing flood damage without the backing of insurance coverage. Many people in the small coastal community, which faces the Gulf of Mexico southwest of Fort Myers, did not have flood insurance coverage.
What's more, Sanibel Island is a microcosm of a greater insurance challenge facing Florida and the country.
Only about 18.5% of homes in Florida counties that faced a mandatory or voluntary evacuation order the evening before Hurricane Ian landed had a flood insurance policy with the National Flood Insurance Program, the federal government program administered by FEMA, according to an analysis conducted by the risk management consulting firm Milliman. Even in designated flood hazard zones within those counties, fewer than half of the homes had a policy on file.
It appears that, despite an increased occurrence of devastating flood events, a declining percentage of people nationwide have flood insurance policies. The number of policies maintained by the National Flood Insurance Program has declined by nearly 700,000 since 2008, according to data acquired from the federal agency.
“There are many factors that influence this drop in policyholders, including the economic impact of the pandemic, the housing market, affordability, or purchasing flood insurance from the private market,” David Maurstad, the senior executive of the National Flood Insurance Program, said in a statement.
He said that FEMA “continues to market the flood insurance product throughout the country” in an effort “to increase the number of properties covered by flood insurance.” Currently about 5 million policies are under the National Flood Insurance Program, which was created in the 1960s because the private insurance market increasingly declined to cover flood events.
It’s an expensive undertaking for the federal government. Since 2008, the program has paid out $40.1 billion to slightly more than 910,000 claims, according to FEMA’s data, and the agency still owes about $20 billion to the U.S. Treasury after borrowing funds to pay out many of those claims.
With climate change leading to more dangerous storms and expanding the risk of flooding, the U.S. and its coastal communities are beginning to suffer the pitfalls of building in flood-prone areas.
“The risk is there as weather losses are on the rise,” said Lynne McChristian, the director of the Office of Risk Management & Insurance Research at the University of Illinois, “and those exposures are growing because we’re building more expensive things in the most vulnerable areas.”
That has become a growing challenge for FEMA, as it often provides aid to communities prone to flooding. It has hoped that more people in these areas would sign up for insurance — especially those in flood-prone areas. FEMA guidelines have gone so far as to refuse aid to those who have received funds from the federal agency for flooding in the past if they have not picked up flood insurance coverage in the meantime.
“I think anybody who lives near water should certainly purchase flood insurance because it’s your No. 1 tool to help protect your family and your home after the storm,” FEMA administrator Deanne Criswell told CNN last week.
One significant issue is that many homeowners assume a typical homeowner's insurance policy covers floods. Florida law requires insurers to inform their clients about the coverage gap, but many Floridians expressed surprise to find their policy did not cover flooding.
One Florida requirement is that each policy at issuance and renewal must include in at least 18-point bold font four sentences warning that a separate flood policy is necessary. “Your homeowner’s insurance policy does not include coverage for damage resulting from a flood even if hurricane winds and rain caused the flood to occur,” the warning text states.
"I think people might read them less now because it’s all electronic,” McChristian said of the policies and the warnings. “Regulators in several states have tried to do it, but it’s not moving the needle.”
Affordability also remains an essential reason many gave for forgoing flood insurance. The average cost of flood insurance from the National Flood Insurance Program is $995 a year, according to Forbes Advisor analysis. That number can fluctuate depending on the location and floodwater risk the home faces, and it is an additional cost on top of other homeowner policies. That can make it unaffordable or, at the very least, a burden.
Although mortgage companies often require coverage upon purchase of a home in areas prone to flooding, some allow their coverage to lapse as costs have gone up. Others, who own their homes outright, no longer have to maintain that coverage.
Leslie Weyhrich said that she and her husband decided to cut back on insurance coverage for their second home on Sanibel Island in May after 15 years of holding a policy. Each year the price grew astronomically and they knew they would be facing another massive cost for a needed roof repair. Now they will be stuck footing the bill for much of the damage themselves.
“It went up significantly, maybe about five or six years ago,” said Weyhrich. “But every year that bill came due, we discussed whether it was worth it or not because the deductibles were so high, it didn’t cover as much as it used to and it just made less fiscal sense.”
But decisions like these could prove existential for many on the island and for communities across Florida, and it is an issue that is unlikely to be sorted in the near term and could lead to litigation.
“Half the people I’ve talked to on this island are uninsured for flooding and that is absolutely terrifying,” said Chuck Bergstrom, a realtor on Sanibel Island who stayed in his home through the storm. “And whether you have it or not, these insurance companies aren’t here to help these folks right now. They’ll negotiate as hard as they can.”
Those who have flood coverage are also gearing up for their own insurance nightmare as they debate with their carriers whether a home's damage was caused by floodwaters or the hurricane's wind.
The separate policies means companies on both sides are likely to have a drawn-out battle that could become litigious.
"The lawyers are going to have a field day with this," Bergstrom added. "I mean, who pays for what exactly?"
CORRECTION (Oct. 14, 2022, 5:47 p.m. ET): A previous version of this article misstated the status of Susan Cavanaugh’s flood insurance policy. It did not lapse. She did not have flood insurance for her home.