A new report by ValuePenguin.com states that just 7% of homeowners have a flood insurance policy, despite floods being the most common natural disaster.
The Atlantic hurricane season is less than a month away, and while 91% of homeowners have a homeowners insurance, almost three-fourths of U.S. adults think disasters such as hurricanes are getting worse and more than 40% have had property damage from weather.
The report states that 44% of homeowners in Louisiana have flood insurance, which is the highest in the nation. Louisiana was followed by Florida ( 36%), Hawaii (23%), South Carolina (16%) and New Jersey (11%).
Minnesota and Utah have the lowest rate of flood insurance at 0.6%. Rhode Island, Connecticut, Vermont, Massachusetts and Pennsylvania are the most expensive states to purchase flood insurance, with premiums 69-100% more than the national average.
The average cost of a flood insurance policy through the National Flood Insurance Program is $699 a year.
The issue of underinsurance within flood policies is closely tied to a report by Corelogic last month that revealed how underinsurance can impact the lending industry.
According to Frank Nothaft, Chief Economist for CoreLogic, “The disruption of a family’s regular flow of income and payments, as well as substantial loss in property value, can trigger mortgage default; especially if homeowners are underinsured and cannot afford to rebuild.”
The report notes how each area at high risk for natural disasters, such as Southern California and wildfires and the Northeastern Atlantic and Gulf Coast regions from Hurricane damage, as well as Tornado Alley, can be impacted by insufficient funding.
Disruption to income from natural disasters including wildfires, tornadoes, and hurricanes can lead to mortgage defaults, and CoreLogic notes that delinquency and foreclosure spikes following a disaster.
“The financial impact of underinsurance touches everyone; this is especially true after a catastrophic event where widespread property damage can cost billions of dollars,” said CoreLogic.