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Emergency Preparedness 2018
Sponsored by Montecito Bank & Trust and Cottage Health

Emergency Preparedness: Most Homeowners Don’t Have Flood Insurance to Protect Against Damage

Insurance companies may still cover the financial losses in cases where wildfire led to the flooding

Significant damage occurred at the Bonnymede community in Montecito during the Jan. 9 mud and debris flows. Statistics show that only a small percentage of homeowners, locally and nationwide, have flood insurance. Click to view larger
Significant damage occurred at the Bonnymede community in Montecito during the Jan. 9 mud and debris flows. Statistics show that only a small percentage of homeowners, locally and nationwide, have flood insurance. (Urban Hikers / Noozhawk photo)

Flooding is the country’s top-occurring natural disaster, but homeowners may not know that their insurance policies likely don’t cover the extreme weather hazard.

Others may have opted to not incur the additional cost when purchasing their homes, which is typically when individuals buy flood insurance.

“In general, most people don’t by flood insurance unless it’s mandated by their lender,” said Josh Stichter, vice president of HUB International Insurance Services, Santa Barbara. “It’s an additional cost … and when you’re buying a home, you have a lot of expenses going on. It’s normal that homeowners are not adding on an additional cost (at that time).”

Statistics show only 12 percent of homeowners nationwide had flood insurance in 2016.

Homeowners insurance typically only covers damage from fire and winds, not floods.

Flood insurance is separate coverage that must be purchased from the National Flood Insurance Program, which is run by the Federal Emergency Management Administration.

Individuals with federally backed mortgages who live in high-risk areas — Special Flood Hazard Area — are mandated to have flood insurance, while other homeowners with traditional bank-banked mortgages who reside outside the zones can opt for no coverage. 

The majority of homeowners in Montecito who were affected by the deadly mudslides didn’t have flood insurance, according to Stichter and other local insurance industry experts. 

Some of them did not have insurance because they don’t reside in a high-risk area, or perhaps did not expect to be affected by flooding or debris flows. 

Despite not having flood insurance, residents are encouraged to submit claims for reimbursement through their insurance carriers, as some coverage may be available to them through past case law.

“There are a number of legal cases that compel the fire insurance policy to cover a mudflow that occurred as a result of a fire,” said Darren Caesar, HUB International senior vice president.

California Insurance Commissioner Dave Jones recently issued a formal notice stating that if evidence shows the Thomas Fire or other issues covered by a homeowner's insurance policy was the “efficient proximate cause” of mudflow damage, he expects insurance companies to cover the financial losses. 

The notice states that “there is a substantial basis to indicate that the Thomas fire was the efficient proximate cause of the flooding, mudflow, debris flow, mudslide, landslide, and other similar events in Santa Barbara County following the Thomas fire. If it is established that the Thomas fire or another peril covered by the applicable policy was the efficient proximate cause of the damage resulting from these mud slides and other similar events in Santa Barbara following the fire, such damage is covered by the policy regardless of any exclusion in the applicable policy. Once the insured shows that an event falls within the scope of basic coverage under the applicable policy, the burden is on the insurer to prove a claim is specifically excluded.”

Those homeowners, as well as renters, who didn’t have flood insurance when the mudslides hit and may now be considering adding to their coverage should know there’s a 30-day waiting period after the policy is written for it to become effective.

“Typically once a homeowner or renters’ policy quote is provided it can be bound the next day, if all information requested was provided,” Caesar said. “Flood insurance can be bound upon payment to the carrier, however there is a 30-day waiting period for coverage to apply after it’s initially bound.”

The National Flood Insurance Program has a Referral Call Center at 888.379.9531 for information or questions about an existing policy.

There may be exemptions for the 30-day waiting period because of the Thomas Fire, according to Rep. Salud Carbajal's office, which encouraged everyone to confirm their flood insurance policies and apply immediately if they do not have coverage. 

Residents can search the FEMA Flood Hazard Map to see if their homes or businesses are in a flood zone.

Janet Ruiz, California spokeswoman for the Insurance Information Institute, a trade association for insurance companies, said if individuals believe they may be underinsured, they should solicit bids from a contractor who will list all costs related to rebuilding and replacing property in the event of a natural disaster.

“You want to get a detailed bid from a contractor, and you may have to shop around (for one),” Ruiz said. “You don’t want just a couple pages (of a quote).”

Every person has his or her own threshold for what is considered an appropriate risk when it comes to protecting a home, but without adequate insurance coverage and more winter storms on the horizon, now might be good time to reassess, she said.

“People really should think about insurance every year and make sure they have enough coverage to be able to replace (what could be lost),” Ruiz said.

People who did not have insurance, or who were underinsured, and suffered damage in the Jan. 9 storm can also apply for disaster assistance through FEMA and/or for low-interest loans through the Small Business Administration. 

The SBA disaster loan program is available to homeowners and renters, not just businesses. 

Noozhawk contributing writer April Charlton can be reached at [email protected]. Follow Noozhawk on Twitter: @noozhawk, @NoozhawkSociety, @NoozhawkNews and @NoozhawkBiz. Become a fan of Noozhawk on Facebook.

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