In Northeast, flood insurance pricey -- and rare
Hurricane Irene may be headed farther north than one usually would expect of a hurricane. CBS News correspondent Jim Axelrod reports that a lot of homeowners are not prepared.
It's been more than 25 years since the last hurricane ripped through Long Island. But homeowners in Long Beach have been paying higher flood insurance rates for the last three years.
Axelrod asked Charlie Theofan, the town's manager, what flood insurance is costing somebody in Long Beach.
"I'm gonna say if you're lucky -- if you're lucky -- it's costing you about $1,700 a year," said Theofan.
"What's your deductible?"
"You're deductible is probably at least $5,000."
"How does that sit with people?" asked Axelrod.
"Not well," said Theofan.
After Hurricane Katrina inflicted $80 billion in damage, insurance companies dropped hundreds of thousands of policy holders along the East Coast. Many were forced to buy more expensive policies or look to the federal government for coverage.
U.S. East Coast braces as Hurricane Irene looms"Virtually no private insurers are writing the policies anymore," said Theofan. "They're only through FEMA. They're at FEMA's rates at FEMA's terms. It's pretty much take it or leave it."
Population and property values here are among the highest in the nation. According to FEMA, policy holders along the northeast coast are insured for more than $124 billion in flood protection.
"You don't look at market value," said Michael Barry of Insurance Information Institute, "you look at what is the cost to rebuild these homes. And that's what property casualty insurers look at. If there was to be a major storm that was to hit Long island, owing to its dense population and expensively-built real estate, it could be a major event."
It's water that causes the most damage in a hurricane. But just a fraction of northeast homeowners have proper flood coverage. According to the most recent survey, just 30 percent have flood insurance in high risk areas. The number is even smaller for those who live on higher ground.
Insurance adjusters expect Irene to be expensive storm even if it arrives here just as a tropical storm. Natural disasters have already cost insurance companies $90 million so far this year -- 20 percent more than the last two years combined.
