A Perfect Storm
Our harsh, late winter set the stage for what has become Nebraska’s worst flooding in 50 years. As we approached the middle of March, snow was still piled high on yards and fields when a bomb cyclone caused an epic drop in air pressure. This produced massive amounts of moisture that led to blizzard and flooding conditions across the Midwest. Ranchers and farmers were forced to abandon their fields and livestock. Residents fled to shelters, leaving their homes behind. There was little time to protect property or pack belongings.
Vice President Mike Pence visited Nebraska on March 19 to see the devastation firsthand. According to early estimates released by state officials, the damage exceeds $1.3 billion, including $449 million in infrastructure loss, $85 million in private home and business loss, $400 million in livestock loss and $440 million in crop loss.1
Picking up the Pieces
As the water slowly recedes and cleanup efforts begin, people are wondering how to rebuild. A disappointing surprise for many is that standard homeowners insurance excludes flood-related events. Damage is considered flood-related when:
- Water covers at least two acres of land that’s normally dry; or
- Water damages two or more properties
Also, the water has to come from:
- Overflowing inland or tidal waters
- Unusual, rapid accumulation or runoff of surface waters from any source
Water and seepage from sewer or drain backups or a sump pump that overflows is not considered a flood.
Some people may find relief if they have separate flood insurance through the National Flood Insurance Program (NFIP).
Understanding the NFIP
The NFIP is a federally regulated program offering affordable insurance to those who adopt and enforce floodplain management regulations. It provides up to $250,000 of coverage for personally owned homes and an additional $100,000 in coverage for personal property. Commercial property can be insured for up to $500,000.
The NFIP will cover costs to rebuild or the actual value of a home or building (whichever is less). This includes:
- The structure, its foundation and electrical / plumbing systems
- HVAC equipment (air conditioning, furnaces and water heaters)
- Kitchen appliances
- Permanently installed carpet over unfinished flooring
- Permanently installed wallboard, paneling, bookcases and cabinets
- Window blinds
- Detached garages (limited to 10% of the policy)
- Debris removal
The personal property policy covers:
- Clothing, furniture and electronic equipment
- Curtains, window AC units and portable microwaves
- Carpets not covered by the building policy
- Washers and dryers
- Freezers and frozen food
- Up to $2,500 in valuables
It’s important to note that personal property claims are paid based on actual cash value and not replacement cost.
There are some items that the NFIP won’t cover. This list includes, but is not limited to:
- Items that would typically belong in a safety deposit box such as precious metals, stock certificates, bearer bonds and cash
- Outdoor items such as landscaping, fences, retaining walls, wells, septic systems, storm shelters, walkways and decks
- Recreational items such as hot tubs and swimming pools
- Temporary housing and other living expenses
The NFIP also limits coverage for basements (including walkouts), crawlspaces or any living spaces where the floor is below ground level. These coverage limitations include:
- Carpet, tile and other flooring
- Some drywall (depending on how far below ground level)
- Walls and ceilings not made of drywall
- Bookcases and window treatments
- Most personal property such as clothing, electronic equipment and furniture
Weighing the Numbers
On average, only 15% of homeowners have flood insurance, yet flooding can affect everyone. More than 20% of claims come from policyholders in moderate-to-low risk flood zones. Some believe that government aid will come to the rescue, but this comes largely in the form of loans that must be repaid with interest. Furthermore, these loans are only issued in areas that are declared a federal disaster (which is done in less than half of all flooding events). The average flood claim is $30,000, yet the average FEMA disaster grant is just $5,000.2
If you would like to explore flood insurance, begin by creating an inventory and determine what it would cost to replace the contents of your home or business. Next, estimate the cost of repairing or rebuilding your property. These figures equal your total potential loss. If this number exceeds the NFIP’s policy limits, you can potentially add a private flood insurance policy called “excess coverage” to insure the full value of your property.
A Stronger Future
If anything positive can come from this disaster, we hope it’s that people are more prepared and better protected. Take the time to understand your insurance so that you know how it will respond to certain events. This knowledge can help you build a risk management plan that is right for you. Our insurance specialists can review your policies, explain how the coverage works, answer questions and provide further guidance. This has been a devastating experience, but we know how resilient our neighbors, our clients and our people are – and we know we will all come back stronger than ever.
1 Schwartz, Matthew. “Nebraska Faces Over $1.3 Billion in Flood Losses.” March 21, 2019. NPR website. Accessed on March 22, 2019 at https://www.npr.org/2019/03/21/705408364/nebraska-faces-over-1-3-billion-in-flood-losses
2 “Why Buy Flood Insurance.” Department of Homeland Security website. Accessed on March 24, 2019 at https://www.floodsmart.gov/why/why-buy-flood-insurance