Experts have indicated there are billions in damages caused by the Colorado floods. However, new information reveals much of the damages to homes and businesses could be uninsured. Even the local governments are probably not covered for flood loss, according to the experts.
The recent floods could end up costing homeowners, businesses and local government entities more than $2 billion, according to Eqecat, which is an agency that conducts loss estimates for the insurance industry. Unfortunately, however, unlike many other natural disasters, the firm and an insurance trade group agree that a significantly high number of those losses will not be covered by insurance.
According to Eqecat, the flooding resulted in $900 million in expenses to homeowners for damages and evacuations. An additional $1 billion in expenses are being faced by the businesses and local governments. Damage from flooding is not covered by private insurers. Flood damages are covered by the National Flood Insurance Program, which is part of the Federal Emergency Management Agency. Since the significant number of homes that were damaged from the flooding are not in flood plains, the number of properties covered by flood insurance is very low.
Usually flood insurance is only purchased when it is required by a mortgage lender, the experts indicate. Because this particular area that was impacted was not prone to flooding, very few people would have purchase the optional coverage. Most mortgage lenders would not have required flood insurance coverage in the area because the risk of flooding was considered minimal. Governments generally do not have flood coverage either, so they do not have proper coverage for the damages.
The listings of the most expensive disasters indicate that the flood insurance program paid out a record $16.3 billion in claims in 2005 for Hurricane Katrina and $7.1 billion last year after Super storm Sandy. The flood insurance program is offered through the federal government.
Even without having the proper insurance coverage, property owners will be eligible for federal help, including grants and low-interest loans. Upon the approval of Congress, local governments may be able to receive assistance. The Department of Transportation has committed $35 million to Colorado for road and bridge repairs. As the calculations for damages mount, it becomes obvious that much of those expenses will not be covered and the property owners will be left to foot the bill.
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