California homeowners still not buying flood insurance, Why?

SACRAMENTO, California — Damage from this weekend's Pineapple Express could be in the billions of dollars, but people in California aren't in a hurry to file insurance claims.

Since less than 2% of houses in California are insured against floods, people who have lost their homes to trees, mudslides, or water damage will probably have to pay to rebuild in full.

California had a lot of disasters caused by bad weather before climate change made flames and storms worse. But while people are clamoring for fire insurance because insurers are leaving the state, flood insurance is pretty easy to get. It's not getting through to people.

California flood insurancePhoto byKPBS

Atmospheric rivers caused $4.6 billion in damage last winter and destroyed thousands of houses, most of which did not have flood insurance. When the new rules came out, though, not many people signed up for them. In California, about 3,000 people signed up for the National Flood Insurance Program, which covers most houses in the state, from January to July of last year. However, enrollment has gone back down, from 194,625 policies in November to 191,622 policies in December.

Rob Bhatt, an insurance expert for LendingTree, said, "We haven't seen a rush of people on this end saying, 'Oh, I'm going to get flood insurance, I need flood insurance, I want to buy flood insurance.'" "I find that a little strange." So why don't people in California get flood insurance? Because of a few things.

One reason is that they don't have to. In California, you can buy separate flood insurance from your home insurance if you live on land that FEMA says will flood more than once every 100 years. This is different from fire insurance, which is needed for any federally backed mortgage in the state.

These maps are also out of date. For example, independent risk modeling shows that 23% of California homes are in high-risk flood areas, but only 2% have the right insurance.

NFIP policies can also be pricey, especially when you add in the fact that home insurance rates are going up because of a higher chance of fire. Bhatt said that the usual policy costs $866 a year, or $70 a month.

"The cost of insuring your home as a whole, including the part that covers fires, has gone up so much that you're thinking, 'Oh my gosh, I'm already paying so much for my regular homeowners insurance.'" He asked, "Why do I have to pay for flood insurance?"

There's also how risky something seems. People who own property may be so used to natural events like wildfires and droughts that they don't notice the threat that is coming from the opposite direction.

The Source: politico