South Norwalk — After the initial anguish subsides over the destruction wrought by Hurricane Sandy, many storm victims will face another shock: Their homeowner’s policies may not cover the damage to their homes.
Mortgage lenders require homeowners on the coast and on floodplains near other bodies of water to buy flood insurance. Because private insurers dropped this type of coverage from homeowner policies in the 1960s, Congress created the National Flood Insurance Program (NFIP), which is run by the Federal Emergency Management Agency.
Insurance companies and independent agents sell the policies, but the federal government underwrites the coverage.
“It is very hard to tell you how many people should have flood insurance and do not,” said Diane Ifkovic, of the Connecticut Department of Energy & Environmental Protection. “I can definitely say that not everyone in the floodplain carries flood insurance.”
There are about 41,000 flood insurance policyholders in Connecticut.
But Ifkovic said many of those living in floodplains let their policies lapse after they pay off their mortgages.
“I was at the Milford Recovery Fair on Saturday, and there were a few homeowners where this occurred. They had paid off their mortgage, let the insurance lapse and had absolutely no flood coverage,” she said.
That’s what happened with Arthur Gill, who owns a home in the Shorefront Park neighborhood of South Norwalk.
Gill, an 85-year-old retired typesetter, has not had a mortgage on his home, which sits less than 20 yards from the water, for many years and never bought flood insurance.
Hurricane Sandy’s 10-foot surge ripped off the back wall of his home, flooded it with 3 feet of water and caused enough destruction for the property to be condemned.
Urban Mulvehill, an attorney who takes care of Gill’s financial affairs, said Gill had not purchased flood insurance because he thought it was too costly and because no one expected a storm like Sandy.
“Arthur has been through storm after storm, but nothing like this,” Mulvehill said. “Usually all he has to do is sweep a little water out of the garage.”
According to National Flood Insurance Program, the average flood insurance premium costs less than $570 a year. But policies covering expensive beachfront property can cost substantially more.
That expense is a deterrent for many people who aren’t required by their mortgage lenders to buy the insurance.
FEMA Administrator Craig Fugate said he doesn’t know how many home and business owners sustained uninsured flood losses when Sandy’s winds pushed water inland, but he’s concerned that many don’t have flood coverage.
A Wall Street Journal analysis found that cities in Connecticut have relatively low percentages of housing covered by the federal flood insurance program: 6 percent in Norwalk, 12 percent in Fairfield and 13 percent in Westport.
Catherine Smith, the head of the Connecticut Department of Economic and Community Development, said it’s too early to tell how many Connecticut businesses impacted by the storm lack flood coverage.
“We haven’t seen a huge flood of businesses coming to us yet, but it’s definitely going to be an issue,” Smith said.
Then there’s the problem many renters face.
Most people, including Laurie Dinatale, are moving out of their homes on Knorr Street in South Norwalk, near the city’s marina. Sodden heaps of carpeting and household items were piled along the curb of most houses. Huge dumpsters filled with furniture, including sea-soaked couches beginning to mold, ruined clothes and even appliances smashed or otherwise damaged by Sandy’s floodwaters were parked in many driveways.
Most of the people who live on Knorr Street are renters who have to vacate their homes for several months so repairs can be done. But Dinatele and many of her neighbors won’t be compensated for their losses because their renter’s insurance doesn’t cover flood damage.
Renters can buy a federal flood policy. But since it’s not required, most, like Dinatale, don’t.
“There was 2 feet of water in my home,” Dinatale said. “We lost our pool, our deck and most of the stuff in the shed. But what is worse is that my husband ran his (landscaping) business out of the house and everything he had is gone.”
In July, Congress reauthorized the NFIP program for five years and reformed it by increasing premiums and phasing out subsidies for second homes and repeatedly flooded properties.
But insurers who have written flood policies are concerned there isn’t enough money in the program to cover everyone with flood policies who will make Sandy claims.
FEMA has about $920 million in its flood insurance account, and another $2.9 billion left in borrowing authority from the U.S. Treasury. That means the flood insurance program can pay out about $3.8 billion in claims.
The Consumer Federation of America estimates Sandy will lead to 200,000 flood insurance claims, exhausting the NFIP.
That means even those who have bought flood insurance may not receive full payouts unless Congress acts to appropriate more money.