Few in Wilson insured for flooding

Most homeowners across Wilson County will be left high and dry by their insurance company if the Wolf Creek Dam in Kentucky breaks. Only 475 properties county wide have federally-backed flood insurance policies – the only type of coverage available.

Last week the Army Corps of Engineers released a new report on the Wolf Creek Dam that rated the 55 year-old structure at a "high risk" for failure. The dam has been a concern for years, but the report put Wolf Creek on an Army Corps list of the most breech-prone dams in the country. Army Corps projections say that over 2,000 homes in Wilson County could be flooded if Wolf Creek breaks, meaning only a handful of potential victims currently have flood protection as part of trier insurance plan.

"People think their homeowners policy covers flood damage," John Major, a partner in First Insurance Group in Lebanon, said. "But the fact is, really none of them do."

An act of Congress created the National Flood Insurance Program in 1968. The NFIP was designed to offer Americans something their private insurance companies wouldn't – protection from the rising waters of a flood.

"Ninety percent of polices do not offer that," Butch Kinerney, spokesman for the Federal Emergency Management Agency (the agency that administers the NFIP) said. "We're the only place to turn."

The NFIP works through a homeowner's regular private insurance company. The rates are set by FEMA, but administering the policy is handled by a homeowner's usual agent. NFIP claims are reported like any other home damage. The only difference is the money comes from the government, not the private insurer.

"Private insurance handles everything," Kinerney explained. "There are no extra hoops to jump through. They report the claim, send out an adjuster and we dispense the money."

With flood insurance so easy to obtain, why are so few homes in Wilson County covered? Kinerney and local insurance agents say the answer is a mixture of price, misinformation and that ever-present American pastime, the gamble.

Cost factor slows adoption

Every year, FEMA spends millions of taxpayer dollars on a torrent of television and internet commercials urging people to purchase flood coverage through the NFIP. Yet only a trickle of homeowners head to their local agent to buy the policies every year. According to FEMA numbers nearly 80 percent of Tennessee homes in potential flood plains go without flood coverage.

The main factor is cost, local insurance agents say. Paul Stovall, an Allstate insurance agent in Lebanon, said that when faced with the additional yearly price of an NFIP policy, many homeowners choose to bet the odds.

"Depending on where you live, [flood insurance] can be pretty expensive," he explained. "The question some people ask themselves is 'how likely is it that this is going to happen?'"

Major agreed. "Today, the rule of thumb for people is 'is this dam going to break?'" he said, referring to the Wolf Creek rating.

The average price for an NFIP policy in Wilson County is $534.00 per year. The policy covers all kinds of flooding, not just large-scale disasters – if a water main breaks and floods only two or three homes, for example, NFIP insurance would cover the damage. The average homeowners policy would not. Depending on the location, size and price of a home, the price a Wilson County homeowners will pay for a new policy could vary a great deal.

Homes in so-called "100 year" flood plains are required to have flood insurance as long as they're under mortgage to a bank. Those houses have the most expensive flood insurance premiums, some $1,000 or more per year. As the risk of damage from a natural disaster lessen, so does the price homeowners will pay.

"If you're not in a really flood prone area, the yearly price could be $300.00 or less," Stovall said.

"That's the worst part about this–- the people that need [flood insurance] the most are often the people who can least afford to buy it," Kinerney said. "People figure out what they're going to do based on their bank accounts. $400.00 to $500.00 a year? That's a high burden for a lot of the country."

Myth of federal relief

Another key factor preventing people from buying flood coverage is the belief that any large disaster like a Wolf Creek Dam breakage would come with enough federal disaster relief to recoup any damages, Kinerney said.

"If there's a federal disaster declared by the president then, yes, help would come," he said. "But that help is often not what people expect."
Under federal law, unemployed and underemployed people receive a maximum $28,200.00 payout from the government to recover after a natural disaster. Relief for middle class victims comes almost entirely in the form of low interest loans distributed through the federal Small Business Administration.

"In effect, you have two mortgages," Kinerney explained. "It's not free money."

Even worse, Major said, there was an ironic caveat to the federal loans that would leave many people who decided to forego flood insurance more than a little frustrated.

"If you take that government loan," he said, "they're going to make you buy flood insurance on the house you rebuild."

Changing environment after warning

The local insurers said that Wilson County residents are getting informed in the face of the Army Corps announcement. Both Major and Stovall said a number of existing clients have called in asking about flood coverage in the past week.

"We've had some activity related specifically to this [Wolf Creek] thing," Major said. "People are starting to worry about this."

Stovall said that the increase in interest regarding flood policies is a predictable phenomenon.

"Once it gets into public discussion, people start wondering about it," he said.

Major said that because of the special nature of NFIP-backed insurance, customers can buy it, cancel it, and buy it again without penalty. He's advising his clients to pick up a policy on a temporary basis until things at Wolf Creek are more understood.

"If you keep buying and canceling regular homeowners insurance, your quote is going to go up," he said. "That doesn't happen with flood insurance."

Kinerney said if he lived in the path of Wolf Creek, the decision would be a simple one.

"If my house were downstream of that thing I'd be pretty darn ready to go talk to an insurance agent," he said. "It's just one more thing you don't have to worry about."

"Besides," he joked, "the cost of replacing my kids toys alone would make it worth it."

Staff Writer Evan McMorris-Santoro can be reached at 444-3952 ext. 16 or at evan.mcmorris@lebanondemocrat.com.