Q&A: Homeowners should weigh factors when considering flood insurance
Only 111 Duluth households had flood insurance policies when the area was hit by heavy rains and flooding last week, according to the National Flood Insurance Program.
Less than 1 percent of homeowners statewide spring from flood insurance, according to the Insurance Federation of Minnesota.
Minnesota Commerce Commissioner Michael Rothman spoke with Tom Crann of All Things Considered about the factors homeowners should weigh when considering flood insurance.
Tom Crann: Why do you think so few Minnesotans actually have flood insurance?
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Michael Rothman: It's a little bit based on experience, and somewhat, that people are facing changing weather patterns. I also think it's something that people who should have flood insurance don't often get the information or aren't required to do it.
It's one of those things where do have a bit of a gap and more awareness and education is important because people need to take a look at their flood insurance needs. Not just in areas where there are rivers, but in other areas where we know from rainstorms and some big events that it can be serious damage and consequences.
Crann: I think a lot of people think that if they don't live in a floodplain that they actually can't get flood insurance, or don't need it. Is that correct?
Rothman: I think that's probably true. Anyone can purchase flood insurance no matter the projected risk of flooding in your area. There's a high-risk, a moderate-risk and low-risk areas. We've seen in recent years that even in moderate and low-risk areas there's flooding. And people that are in those areas should be looking at their flood insurance needs.
It's relatively inexpensive. It depends on, of course, everyone's own circumstances. Insurance is one of those things where you take into account your own risk and decide whether you can afford the premium and take the risk or not. Many people can't and shouldn't take the risk. Generally, flood insurance runs between $400-$1500 or so a year.
Crann: It will be more expensive though in either floodplain areas or more frequently flooded areas, right?
Rothman: People can go on what's called the FloodSmart website and it will show you a projection, estimation of those costs.
Crann: Some say that climate change is bringing more of these events with a lot of precipitation. Do you think that's going to change the way we consider the risk of flooding and getting insurance?
Rothman: It's important for everyone to recognize, yes, that weather patterns are changing. It's not limited to river areas that flooding and flash flooding like this is happening. These floods are greater than the average, these are 100 year events or even greater that we're experiencing. And it does make sense for people to consider whether or not they should purchase flood insurance.
Also, there's a cheaper form of insurance that can cover some of the issues that relate to sewer backup or sump pump failures. It's not just flood insurance. That's a relatively inexpensive way to go, and it's just an add-on or endorsement to the policy.
Crann: What's next for people who suffered losses and may not have been insured?
Rothman: We'll learn more about that, but the state, local units of government and other organizations are assessing right now and getting appropriate responses to those people that need assistance. As we develop and we figure out the exact scope of this, it will play itself out and we'll get to some more assistance.
Crann: Are we at a situation where we recommend that people check their coverage and policies?
Rothman: It's important to consider the risks of flooding. This is an experience that shows that it doesn't necessarily limit itself to the high-risk areas.... I think that in terms of flooding, just like any other homeowners risks that are out there, people should act now. They should take a look and determine whether or not they need insurance.
They can also do home inventories, I often encourage people to make lists, take photographs. Then when a potential insurance claim happens, immediately contact their insurance company or agent, make a claim then work through the process.
If any issues come up, people can call the Minnesota Department of Commerce, our consumer response team is available. We have a number they can call, which is 651-296-2488.