Home and business owners across a dozen US states awoke to an unpleasant reality recently: Significant portions of their property damage caused by flooding from hurricane Sandy are unlikely to be covered by insurance. Thousands of homeowners in New York, New Jersey and nearby states added flood insurance last year after Hurricane Irene and Tropical Storm Lee swamped much of the same area with heavy rains. But many others are likely to find that their flood insurance policies have lapsed or that they wrongly assumed their homeowners’ policy would cover the damage. Flood insurance “is mandatory if you have a federally backed mortgage and you’re living in a flood-risk area,” said Erwann O Michel-Kerjan, managing director of the Wharton Risk Management and Decision Processes Center at the University of Pennsylvania. But, he added, “the reality is slightly different. After many events, we realize that many people who were supposed to have that coverage were not covered.”
Just how many people face losses from this week’s storms is not yet known, according to officials at the Federal Emergency Management Agency, which administers the National Flood Insurance Program. The programme subsidizes premiums on policies that are sold through private brokers.
