How can you tell if you should have flood insurance in NC?

Flood waters caused by heavy rains from Hurricane Matthew cover signs and buildings on U.S. 70 in Kinston in October 2016.

The massive flooding in Texas this week is renewing curiosity in a perennial topic in North Carolina: flood insurance.

The Texas disaster demonstrates that you don’t have to live in a high-risk flood zone to be exposed to major water damage.

That’s a truism in the insurance industry, but it goes in and out of style among homeowners.

“Unfortunately, nothing sells flood insurance like a flood,” said Lynn McChristian, director of catastrophic response for the Insurance Information Institute and a professor of insurance at Florida State University. “But after four years, they forgot why they got it because the creek didn’t rise and they let it lapse.”

Hurricane Matthew a year ago didn’t exceed 15 inches in North Carolina and delivered less than 10 inches in most places it drenched and yet flooded out whole communities. Almost a year later, people are still cleaning up the mess in some places.

It’s hard to know how many North Carolina residents would be wiped out by flooding on the scale that Texas has experienced. (Some parts of the state saw 50 inches of rain from Hurricane Harvey.) But data indicates tens of thousands who don’t live in high-risk flood areas and probably feel immune to floods would be washed out. Very few of them are likely to have flood insurance.

Statewide, 130,033 households have flood insurance, including residents in Asheville and other high-altitude regions, according to the Federal Emergency Management Agency. But more than 250,000 households in coastal North Carolina counties are exposed to just one type of flooding – storm surge – which results from hurricanes causing sea waters to rise, according to the 2017 Storm Surge Report issued by CoreLogic, a data analytics firm in California.

Here is some basic information about flood insurance.

Q: Who is required to buy flood insurance?

A: Homeowners with federally-backed mortgages who live in areas at high risk of flooding. Additionally, lenders might require it for borrowers deemed at risk of flooding who don’t live in designated areas for high flood risk.

Q: Who doesn’t have to buy it?

A: Typically people who have paid off their homes or those who live in low-to-moderate flood-risk zones.

Q: How is flood risk determined?

A: Computer models generate maps that assess flood risk based on historical experience. According to FEMA, more than 20 percent of claims are paid out to people who don’t live in high-risk flood zones, and the percentage of such payouts would be higher if more homeowners had flood insurance.

Q: Who sells flood insurance?

A: Insurance companies sell the federal policies, which are issued through the National Flood Insurance Program. The feds underwrite the costs; the insurers administer and manage the policies. To buy a policy, contact a home insurance agent, or search for agents online.

Q: How much does flood insurance cost?

A: The costs depend on the location of the home, proximity to flood exposure, type of construction and other factors. However, insuring a home in a low-risk area to protect against a once-in-a-500-year flood can cost as low as $500 a year. On the other hand, consider the cost of not being insured: The Federal Emergency Management Agency says that the financial cost of 1 inch of water inside a building can be about $27,000.

Q: Is flood insurance worth the cost?

A: According to an April report by the U.S. Government Accountability Office, flood insurance is underpriced to encourage the public to buy the coverage. As a result, FEMA still owes $24.6 billion as of March for previously paid out claims. Some critics of the program say that underpricing flood insurance exposes more people to dangerous flooding because it encourages developers to build homes in flood-prone areas.

John Murawski: 919-829-8932, @johnmurawski