Many N.Y., N.J. homeowners lack flood insurance, costing FEMA up to $10B

October 31, 2012 04:30PM

Many homeowners in flood-drenched New York and New Jersey may find that their insurance policies do not cover costs due to damage caused by Hurricane Sandy, the New York Times reported.

For homeowners with federally-backed mortgages in high flood-risk areas, flood insurance is mandatory, the Times said. However, many homeowners forget to renew flood insurance or wrongly assume that homeowners’ policies will cover flood-related damage. 

“After many events, we realize that many people who were supposed to have [flood insurance] coverage were not covered,” Erwann Michel-Kerjan, managing director of the Wharton Risk Management and Decision Processes Center at the University of Pennsylvania, told the Times.

The Federal Emergency Management Agency, or FEMA, will offer loans and some grants to homeowners who are not covered, at an estimated cost of between $5 billion and $10 billion to taxpayers, the paper said.

And even those who are insured may find that not all costs are covered. “Policies on residences of any type are limited to coverage limits of $250,000 on the structures and $100,000 of contents, and businesses are bound by $500,000 in building coverage and another $500,000 in contents,” the Times said. [NYT] –Guelda Voien