Despite Hurricane Katrina’s devastation, a new survey says that most Americans are not very concerned about buying flood insurance for their homes.
Only 14 percent of Americans say they have purchased flood insurance for their primary residence, according to the survey of 700 homeowners, conducted for the Chubb Group of Insurance Companies by Opinion Research Corporation. Seven of the 101 homeowners (8 percent) who had flood insurance purchased it following Hurricanes Katrina, Rita and Wilma; all the new purchasers were more affluent college graduates. Ninety-one percent of the 101 homeowners said they already had it and did not purchase more coverage following the hurricanes.
“Chubb’s survey clearly shows that, other than some better educated individuals with higher incomes, many Americans are risk takers when it comes to protecting their homes, valuables and financial well-being from flood damage,” said Eric Pruss, senior vice president of Chubb & Son and strategic marketing officer for Chubb Personal Insurance. “However, this is a risk that few people can afford to ignore, especially in light of seeing the potential for devastation.”
What Is Damaged?
Among those whose home has been flooded, 34 percent said carpeting or wood floors were destroyed. Other destroyed possessions included sentimental items (19 percent), furniture (15 percent), personal papers and information (12 percent), and art or collectibles (4 percent).
Why Do People Buy Insurance?
Those who have purchased a flood insurance policy said they did it because:
* While their house is not near a body of water, they are taking no
chances (28 percent);
* their mortgage lender required it (27 percent);
* their house is near a body of water (24 percent); or
* their insurance agent or broker recommended it (20 percent).
Among those who purchased a flood insurance policy, 25 percent have purchased excess flood insurance policy from a private insurer that provides higher home and contents limits beyond the National Flood Insurance Program. (The NFIP’s maximum home limit is $250,000 and contents limit is $100,000.) These individuals tend to have higher incomes and levels of education and primarily reside in metropolitan areas.
What Should the Government Do?
Survey participants were very opinionated about the role of the government in rebuilding flood damaged homes. Only 31 percent agreed that the federal government should bail out those whose homes were destroyed by flooding and who did not purchase flood insurance. Sixty-eight percent said state and local governments should impose restrictions on building along coastal areas. Fifty-nine percent said it makes no sense to rebuild a city that is below sea level after flood damage.