Flood Insurance versus Federal Disaster Assistance

In August a slow moving unnamed storm system settled over Louisiana dumping up to 31.39 inches of rain over 72 hours resulting in a 1,000 year rain. Massive flooding occurred affecting 188,729 homes and 507,495 people, of which 60,000 were damaged by flood waters. It’s estimated that 78% of the homes damaged by flood waters did not have flood insurance.

Congress approved $438 million in disaster recovery aid. Louisiana Governor, John Bel Edwards has requested additional disaster aid bringing the total aid request to over $4 billion from the original request of $2.8 billion. The reason Governor Edwards requested more money is the data on damaged homes has become clearer, as has the impact to small businesses and infrastructure including roads, bridges, etc. With this as our backdrop, let’s contrast what Federal disaster assistance provides versus flood insurance.

Federal Disaster Assistance

  • In order for Federal Disaster assistance to be made available, the state’s Governor must first request the President to declare a major disaster exists
  • Congress appropriates funds to FEMA for disaster assistance on a fiscal year basis. If additional funds are required, Congress must approve that appropriation
  • Anyone in the affected counties or parishes may apply for Federal assistance online at www.DisasterAssistance.gov or by calling (800) 621-3362
  • Disaster assistance may include grants administered by FEMA or loans administered by the Small Business Association
  • Grants can be used to help pay for temporary housing, emergency home repairs, uninsured and underinsured personal property losses, and medical, dental, and funeral expenses caused by the disaster
  • FEMA housing assistance is available regardless of income
  • SBA loans for other types of aid including personal property losses, vehicle repair or replacement, and moving and storage expenses is income dependent
  • FEMA grants do not have to be repaid but SBA loans do
  • FEMA does not pay to return your home to its pre-disaster condition however, SBA loans may do that
  • FEMA grants are to pay to repair damage not covered by insurance
  • Federal assistance is available to people with flood insurance

Flood Insurance

  • Homeowners may purchase standard flood insurance with coverage on the home and personal property whether they are in a mandatory flood zone or not
  • Homeowners who select coverage on their home only forgo any coverage on their contents
  • The maximum amount of coverage available on a standard flood policy is $250,000 on the home and $100,000 on personal property
  • Renters may purchase up to $100,000 of personal property coverage only
  • Flood insurance on the home is paid on a replacement cost basis while coverage on personal property is paid on an actual cash value or depreciated basis
  • Homes with a replacement cost greater than $250,000 may purchase excess flood coverage from a variety of companies
  • Flood insurance does not cover additional living expenses, or loss of use, or business interruption coverage

The advantage of flood insurance is it provides greater coverage with a faster response from a claims adjuster than waiting on approval for a Federal grant or SBA loan. Covered repairs paid by a flood policy do not have to be repaid, however, SBA loans for repairs must be repaid. The person or family is also not dependent on the President to name their county a disaster area.

What do you think? Share your comments, questions, and experiences with me on my Facebook, Google +, and LinkedIn pages. I’d love to hear from you!

Evie Wise
Evie Wise


Evie Wise
Evie Wise

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