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Record Storm Threatens Flood Insurance Program

A New York Times report explores the potential impact of the East Coast disaster.

Claims from Hurricane Sandy could further threaten the deeply indebted federal flood insurance program that Ocean City property owners rely on and lead to dramatic changes in the future.

A report in the New York Times by Eric Lipton, Felicity Barringer and Mary Williams Walsh suggests Sandy will be the second most-costly storm in history in terms of claims paid.

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Read "Flood Insurance, Already Fragile, Faces New Stress."
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"Congress, just this summer, overhauled the flawed program by allowing large increases in premiums paid by vacation home owners and those repeatedly hit by floods," the New York Times reporters write. "But critics say taxpayer money should not be used to bail it out again — essentially subsidizing the rebuilding of homes in risky areas — without Congress’ mandating even more radical changes."

President Barack Obama signed a bill in July that extended the National Flood Insurance Program (NFIP) for five years, and the local real estate industry breathed a sigh of relief.

Thomas Bruno November 13, 2012 at 10:09 PM
Kevin - would agree with you if the gov't didn't make it the problem of the govt (and therefore us, the people, who control it). Insurers are not allowed to set rates they want to insure. Many leave markets only to be told they must remain in-state on some coverage lines or risk losing others. Remember premiums are NOT intented to provide a buffer in event of loss. They are meant to fully insure the loss they are calculated to cover. And the means to calculate is to offer a product to many that will provide to only a few, at a price that ensures the math works. Insurers are usually frighteningly accurate - actuaries are very good at this math. Where the process breaks down is when it is overly regulated - when the govt forces insurers to offer insurance at prices that are deemed acceptable. Imagine the outcry if insurers came to homeowners in Monmouth after the storm and said "ok - market rates for all" and the premiums on all houses here jumped 10 fold? If someone making 65,000 gross per annum but who has lived in their house for generations was told they now must pay 8,000 per year for homeowners not 800? Making up the numbers but the point remains. The govt is in this because it has chosen to be in this.
Kevin D. November 13, 2012 at 10:11 PM
Gut wrenching to read and learn about this devastation. Thankfully the good Lord equipped us with some strong people to help with the disaster recovery. God bless all of them - religious denomination of little importance.
Thomas Bruno November 13, 2012 at 10:12 PM
Well said!
Jim B November 13, 2012 at 10:15 PM
flood insurance is only purchased by consumers who are in a flood zone---which means premium dollars are collected from only the ones who would have a flood. As a result, how much flood property coverage can be offered and at what cost? This is why it is backed by FEMA, and not private insurers. Prior to Sandy flood premiums are going up 13% in 2013. jim
Kevin D. November 13, 2012 at 10:22 PM
I hear you Thomas. Excellent valid points made and respect those views. Thanks for sharing.
Watza November 13, 2012 at 10:26 PM
Kevin, Correct and I agree with all your points. I do feel bad for those on or close to the Water. Yet, that was their choice to where they wanted to live and their responsibility to make sure they have enough insurance coverage or if at all. The problem is many either don't want to pay, they take the chance because they will not part with their money or feel it is never going to happen. Especially if they don't have mortgage on it. There is no requirement to buy insurance if you don't owe anything on it. Others have insurance but it is the minimum amount of coverage yet expect the insurance to pay for much more than what their policy was worth. Some individuals want top dollar as new for older furniture, rugs, appliances and outdated houses. Who I do feel bad is for the elderly that bought their homes long ago, much lower cost and could no longer afford the flood insurance and had no where else to go. It is all a risk, but the risk should be with those who made that choice. In no way should we be paying for private companies that own beaches or businesses on the beach. Why should we pay for those who is benefiting in anyway. Like I stated above, it is not like we get to go on the beaches for free or get anything free in return.
Ron Jacobson November 13, 2012 at 10:37 PM
Instead of alowing people to rebuild and rebuild in flood prone areas suppose they got one bite of the apple. If you have flood insurance, first time you have a choice rebuild or buy out, second time, no choice, buy out a fair maket value. The real estate becomes property of the government (that used to be the people) and the private owner is whole to buy elsewhere. When you find yourself in a hole, stop digging!
Sko Hayes November 13, 2012 at 10:38 PM
wookfish, flood insurance is supplemental insurance from the government that people buy because their homeowners insurance doesn't cover flood damage.
Sko Hayes November 13, 2012 at 10:48 PM
Absolutely agree, chattsworth. Homeowners need someplace to go to get insurance to cover their damages, and if the private sector can't be depended on, then the government has to step in. I hope they don't make it so expensive though, that middle class people like myself can't own a home near the water. My parents live down in Florida on the Gulf Coast and despite never filing a claim for anything but minor damage after the several hurricanes they've been through, their homeowners insurance cost is outrageous, and that's when they can find a company that will cover them. I imagine New Jersey coastal residents will see many of the big insurers refusing to renew their homeowners insurance after paying out their claims.
Sko Hayes November 13, 2012 at 10:57 PM
If you think people on the beaches are paying $800 a year in homeowners insurance, maybe you should talk to a few people. Not only will people's premiums go up after this storm, I would bet that many people will not be able to renew their insurance, because the company dropped them as a client. Happens after every storm.
Laci November 14, 2012 at 04:49 AM
Looks like Island Beach State Park will now expand north to the new inlet.
Duffer November 14, 2012 at 11:51 AM
In 17 years my flood insurance has gone up from $310 per year up to $1,420 per year. The vast majority of that price increase has been since Hurricane Katrina. I've never made a claim until this storm. I'm not the type of person to ask for help or money from anyone. This time the damage is more than most working people could pay out of pocket. The entire first floor and all systems have to be gutted and replaced. That's why I've paid my premiums and all those rate increases all these years. I hope I never have to make a flood claim again.
GG BUrnell November 14, 2012 at 12:25 PM
7:24 am on Wednesday, November 14, 2012 The shore areas, who generate a disproportionate amount of taxes, should keep those "extra" taxes they send to Washington and their respective states for use as they deem appropriate. ie. beach protection. Then there would be no problem. You have your way a we have ours.
wookfish November 14, 2012 at 12:53 PM
thank-you Kevin, you said what i meant...again
brokeninbayville November 14, 2012 at 01:15 PM
I live full time on the water and would like my house put up on pilings to eliminate this disaster again. I have a clause I've been paying extra for to do just that and the flood insurance is fighting me on it. Why not elimate the risk? It is just nuts.
vic November 14, 2012 at 01:27 PM
i've been paying for flood insurance for years and now that i have suffered damages caused by flooding from the storm, i can't collect from my policy because the damages were to my foyer, garage and contents in my garage. flood insurance will only pay out if the damages are to your main living area or structure to your property. all of the new properties in ocean city fall into this same category. the only properties that qualify are the older properties that have living space at street level.
Donna Griffin November 14, 2012 at 01:53 PM
Dunes must be priority one wedded with stringent building codes IF the properties are to be rebuilt. Midway Beach fared pretty well compared to other vacation home communities thanks to their dune system measuring 20' x 40'. Ocean views were compromised for the owners there, but they have intact homes awaiting their arrival next season. Ortley had no dune protection. Without same, there should be given little consideration to rebuild those lots closest to the ocean.
Donna Griffin November 14, 2012 at 02:04 PM
vic - How is a foyer not considered a main living area? It is heated square footage.
Donna Griffin November 14, 2012 at 02:12 PM
Ron - Alternately, have the private flood insurance premiums reflect the actual risk. No option on homeowners purchasing flood policies either. If those premiums are $12,000-$20,000/year, then the market for waterfront homes will die a natural death with the next weather-related disaster. On the otherhand, the resale value on those properties will drop like a lead balloon when factoring in those premiums. No one, but those capable of absorbing the risk, will own ocean/bay/lagoon front homes again. That's the only way to make it equitable to the taxpayer, and for better or worse, will forever re-define the Jersey Shore. That would likely be the most financially feasible solution, but not one that I think we as New Jerseyans will find acceptable. Maybe I'm wrong though?!?!
Jay Craig November 14, 2012 at 03:31 PM
In reading through this thread, it looks like many of the same people who have a beef with property owners who elect not to get flood insurance and think they should be required to get it also have a beef with government regulation, particularly government forcing people to do things like buy insurance...
Donna Griffin November 14, 2012 at 03:44 PM
Jay - Insurance by its very nature protects you from financial risks to your property. Health insurance is no different whereby you protect your property from excessive medical bills. NOBODY is forced to buy a waterfront or any other home for that matter. NOBODY is forced to buy a vehicle. If Americans truly lived in a free country, we would be able to privately purchase catastrophic health coverage across state borders that suit our individual property protection needs. A mega-legislative national healthcare policy requiring the hiring of thousands of IRS agents for enforcement is not my idea of smaller government.
wookfish November 14, 2012 at 04:17 PM
that's right Donna, but god forbid you block the views in lets say Beach Haven or Brick,etc.
Jay Craig November 14, 2012 at 04:30 PM
Donna - Thanks for responding...I just wish I understood what you wrote. It meanders from false premise to invalid conclusion and ends up with wacky political spew. The only thing I can say that may be on point to your comment is that I believe in a free country, but not one free of government. As to health care, there is a broad consensus among economists, especially public health policy specialists, that the most efficient means of delivery is a single payer system (with one entity, perhaps the government, providing and administering the insurance, but, not, as people often misunderstand, providing health care). I mention that because you brought it up but I do not get the connection.
Donna Griffin November 14, 2012 at 05:16 PM
Jay - Perhaps...if the government could ever prove that it can accomplish ANYTHING efficiently and under budget. A topic of discussion for another day. My point was that insurance has historically been a property protection mechanism. Insurance was never intended to fund EVERY aspect of healthcare just those expenses deemed catastrophic. We have redefined it to include everything from birth control to acne treatments thus skyrocketing the costs.
Forker November 14, 2012 at 05:23 PM
Hello Jay - something like Medicare or Medicaid? How are they performing? Maybe the US Postal Service is a good example of centralized government ops and efficiencies for millions of residents. Are you able to demonstrate how a single payer system lowers costs which is the problem. Costs are always the problem ie budget deficits. Too many costs
Jackie T. Craig November 15, 2012 at 03:08 AM
Donna Griffin, well stated and I agree. I know some individuals that happen to be town workers, police, teachers who's health insurance pays for messages. It is ridiculous and they wonder why the town's don't have money and going broke. Why do they have these Cadillac plans that most who are paying for them have the basic plan if any. It is out of control and way to many mandates according to my insurance broker. In NJ health insurance policies there in the thousands in mandates compared to other states who have in the hundreds mandates big difference and the reason why NJ health insurance is ridiculously high. The ones who has others paying for insurance does not care, they would if they were paying more for them. The governor started making public workers pay additional money, it is a start but it is still way off base and they should be paying more. Don't even get me started with the ridiculous pensions that is a bad pyramid scheme that will go bust if something is not done.
Jackie T. Craig November 15, 2012 at 12:27 PM
Sorry folks, the word should have been "massages"
John Hayes November 15, 2012 at 04:18 PM
The government doesn't force you to buy homeowners insurance, your mortgage company does. Of course, if you own your home free and clear and do not care to carry homeowners insurance, no one will force you.
J Diaz November 17, 2012 at 05:59 AM
I find it amazing how so many people now have reached the conclusion that summer vacation homes on NJ's barrier islands are inappropriate. For years, while nothing was wrong, NJ residents were happen to collect enormous property tax payments from people owning homes on its barrier islands. If you question the size of these payments, take a look at the annual taxes being paid by Toms River and Brick residents on the barrier island. In fact, it is hard to believe that Ocean County could survive without the taxes being paid by its barrier island residents. As I understand it, these small islands make up about 33 percent of the County's tax base. These residents use relatively little services and don't send children to school there. Maybe people could focus on the real benefit that exists for local residents by this situation. Also, after years of paying flood premiums, this is probably the first meaningful instance that the barrier island residents will be making significant claims. I'd like to know how much of the national program's already existing debt relates to NJ's barrier islands. Residents have paid the requested premiums and are rightfully getting payment under coverage for which they contracted. This is not a windfall, but the insurer's obligation.
Paul November 21, 2012 at 02:35 AM
Do you know how many people are going to have to pay for this storm that does not live on the barrier islands or even close to the Ocean?... I am almost sure with what has to be paid out is nothing close to what you all paid in premiums. Not even close.

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