‘It’s going to be a mess’: The flood insurance crisis following Helene’s wreckage

Hundreds of thousands of people across parts of the Southeast will struggle to rebuild their homes after Hurricane Helene for one reason: Hardly anyone has flood insurance.

In dozens of counties in Georgia, North Carolina and South Carolina that were flooded by Helene, less than 1 percent of households have flood insurance through the federal program that sells almost all of the nation’s flood policies.

“People never thought they would have a problem with flooding,” said Jimmy Isaacs, fire chief of Boone, North Carolina, a mountainous town in Watauga County, where less than 2.5 percent of households are insured. "It's going to be a difficult recovery.”

Helene is highlighting the major gaps in U.S. flood insurance and their consequences as climate change amplifies flood risk both from coastal storm surge and rapidly overflowing rivers in Boone and other inland areas.

Flood insurance is sold separately from homeowners’ insurance, which typically does not cover flood damage. The Federal Emergency Management Agency’s National Flood Insurance Program covers 4.6 million homes and businesses.

But the overwhelming number of people who don’t live on the coasts do not purchase coverage either because they aren’t required to, can’t afford to or don’t think they’re at risk. The result is a dangerously low number take it, leaving millions of people without financial protection from floods and their increasing damage.

States flooded by Helene exemplify the problem. In North Carolina, South Carolina and Georgia, just 2 percent of households in counties that are declared a federal disaster area have FEMA flood insurance, according to a POLITICO's E&E News analysis of agency records.

In South Carolina, just 0.5 percent of the 770,000 households in disaster counties have FEMA insurance.

In North Carolina, 0.8 percent of households in disaster counties have FEMA insurance.

In Georgia, 8.5 percent of properties in disaster counties have FEMA insurance, though the figure is inflated by a large number of policies in coastal Chatham County, which includes Savannah. Excluding Chatham, 0.7 percent of households in disaster counties have FEMA insurance

In Florida, which has one of the highest rates of FEMA coverage, 24 percent of households in disaster counties are covered.

The minuscule coverage rates will slow recovery, drain household savings and force some to abandon their homes. Experts say struggles will be most severe in low-income communities where people have little savings and often cannot qualify for credit from banks or low-interest disaster loans from the Small Business Administration.

“We know lack of insurance can widen inequality post-disaster,” said Carolyn Kousky, a vice president with the Environmental Defense Fund and leading expert on flood insurance. “This storm again stresses how important it is to fill the gaps.”

“It’s going to be a mess,” said Donald Hornstein, director of the Center on Climate, Energy, Environment and Economics at the University of North Carolina at Chapel Hill.

'Very, very concerning' lack of flood insurance

Property owners are required to purchase flood insurance if they have a government-backed mortgage and live in a high-risk flood zone. The zones are determined by FEMA flood maps, which are widely considered outdated and inaccurate, failing to depict current flood risk.

Property owners with FEMA policies can get up to $250,000 for building repairs and $100,000 to repair or replace furniture, clothing and other personal property.

People routinely forgo coverage in places where flooding has not been a concern and in lower-income communities.

“The less income you have, the less likely you are to purchase insurance,” said Andrew Rumbach, a housing researcher at the Urban Institute. Low flood insurance uptake in the inland areas flooded by Helene is not surprising but is “very, very concerning,” Rumbach said.

Residents without insurance can receive emergency aid from FEMA after a disaster. But FEMA typically gives households only a few thousand dollars for emergency expenses and minor home repairs.

The Department of Housing and Urban Development occasionally makes billions of dollars of disaster aid available to homeowners. But it typically takes two to three years after a disaster to get the money to households.

And the SBA offers low-interest loans to homeowners and renters of up to $500,000 to repair property damage and up to $100,000 to repair or replace personal property. But the SBA lends money only to people with adequate credit scores.

“It'll obviously put a lot of stress on people who either don't have savings or who don’t have adequate resources to begin the rebuilding process,” Rumbach said.

A growing body of research backs that up. A 2023 paper examined household finances after Hurricane Florence tore through eastern North Carolina in 2018. The researchers found that uninsured losses combined with declining property values significantly increased households’ risk of mortgage default and home abandonment.

Flood insurance provided “easy to access capital for those who had it, which prevented other kinds of consequences, like having to take out equity against your mortgage,” said co-author Antonia Sebastian, who researches flood risk and finance at UNC Chapel Hill.

A similar dynamic emerged in 2017, Hornstein said, after Hurricane Harvey caused massive flooding in the Houston area and resulted in about $125 billion in total damage . Whether or not a household had flood insurance determined whether they could “stay in their homes and keep their family’s largest financial asset, or not,” he said.

Many homeowners without flood insurance were “set back to square one financially,” Hornstein added, a dynamic he expects will play out with uninsured households trying to recover from Helene.

Major gaps in flood insurance are taking on greater importance as climate change heightens flood risks nationwide. There’s growing evidence that as the atmosphere warms, it can hold more moisture. Major rain events can be far more destructive —including in places that do not frequently experience devastating floods.

“These problems are not going to get any better in the future. They're going to get worse,” said Rumbach. “We need to be planning appropriately.”

Reporter Thomas Frank contributed.