Asheville, North Carolina is a mountain town over 2,000 feet above sea level, and about 300 miles from the coast. That still didn’t protect it from flooding. Hurricane Helene dumped heavy rain on the city—the three-day rainfall ranged from 13 to 30 inches. All that rain caused catastrophic flooding and a death toll of at least 133 (we don’t yet have a monetary figure for the damage)—and in a situation where many homeowners don’t have flood insurance.
Only 2.6 percent, or about 115,000, of North Carolina’s 4.3 million properties have flood insurance, according to an analysis by Neptune Flood Insurance. That’s a private insurance provider, but the analysis used data from the National Flood Insurance Program, the government’s program to provide flood insurance to those living in high-risk areas. (It’s not clear how many homeowners have private flood insurance, but nationwide, private flood insurance makes up “a small fraction of flood insurance policies,” according to Policygenius.)
In Buncombe County, North Carolina, where Asheville is located, less than 1% of households there have an NFIP policy, said Monica Ningen, CEO Property & Casualty Reinsurance, US at insurance company Swiss Re.
North Carolina is not alone: Across the US, about 4% of homeowners have flood insurance, according to the Federal Emergency Management Agency (FEMA), which administers the National Flood Insurance Program. And flood insurance coverage has actually been declining, as weather risks have increased.
“The numbers in Georgia, South Carolina and North Carolina have grown by about 10 to 15% over the past decade, yet the number of flood policies issued by the National Flood Insurance Program has actually decreased,” Ningen said in a statement. A Neptune analysis found that in North Carolina, flood insurance coverage decreased by 2.5% between June 2023 and June 2024.
Why do so many Americans not have flood insurance?
There are several reasons why many Americans are not covered by flood insurance. While most banks require you to have homeowner’s insurance as a condition of your loan, flood insurance is not required—unless you live in a FEMA-defined “high-risk” area and have a government-backed mortgage. (However, FEMA’s flood maps, which are often outdated, inaccurate, and incomplete, do not account for climate change).
Some homeowners may think that flood insurance is included in their homeowner’s insurance plan and therefore think they are covered—but they are not. Some may not know that they live in a flood-prone area. And those who understand that they are at risk can still pass on flood insurance because it is not affordable.
On average, flood insurance costs $819 a year, according to a NerdWallet analysis. It’s also more expensive recently (annual NFIP premium increases are limited to 18% by law) due to variables like the frequency of floods and the rising cost of rebuilding. Even on FEMA’s website, the agency admits that flood insurance is more expensive on average. “FEMA recognizes and shares concerns about the cost of flood insurance and how higher premiums can affect communities,” the site reads.
How to break flood insurance
The reason flood insurance is more expensive is because of the type of risk it covers. In the world of insurance, there are two types of risk, says Seydina Fall, senior lecturer at Johns Hopkins Business School: private risk, and general risk.
Personal risk is something like burglary, which is covered by most homeowner’s insurance policies. That risk is “independent” because if it happens in one house, it does not mean that the neighbor next door is in a position to face it. “You can use mathematical measures to estimate [those risks] very precisely, and have certain things in place,” said Fall.
A flood, however, is a common hazard: if it occurs in one house, it may affect many houses. “Those risks are difficult to avoid, because a 1% chance of an external event may be completely wiped out. [the insurance company] outside,” he adds.
From an insurance company’s point of view, offering that type of insurance is no longer profitable—catastrophe insurance always came with a high risk of loss of insurance coverage, but now, more homeowners than ever need flood insurance, and floods are more common, making that a risk. the risk for insurance companies is even greater. Either they have trouble balancing the risk, or the premiums will need to be so high that most homeowners will not be able to afford them. In Florida, property insurance is already four times the national average, and it’s still rising.
How can we prepare disaster insurance?
This issue of profit and risk management is a problem for casualty insurance in general, Fall notes. From an insurance company’s point of view, addressing this issue needs to be developed, he says, in order to develop products that are compatible with these emerging risks. (Similar issues abound around fire insurance, especially in wildfire-prone areas like California; this summer, Liberty Mutual announced it would not renew fire insurance for about 17,000 California homeowners.)
That innovation might look like rethought policies that “break down risk into smaller bite sizes.” Flood insurance policies may specify a certain level of inundation, or only cover damage when wind speeds reach a certain limit.
That “minimum insurance” approach may mean more types of homeowners policy, but it can also leave millions at risk for damage to their homes. Even one foot of flooding in a home can be incredibly, and very expensive, damaging, destroying electrical outlets and HVAC systems.
As climate change means stronger storms and more frequent floods, experts say there is a need to update flood maps and residents across the country to assess how vulnerable they are to these disasters. Asheville itself was called a “climate zone,” emphasizing how vulnerable all cities are to the effects of climate change.
In some cases, insurance companies are actually leaving high-risk areas like Florida and California. The government doesn’t really have any entry fees. “The policy debate is how much flood risk should be borne by policyholders versus ordinary taxpayers,” Fall said. “Yes, there is government insurance, but it is also useless.” The National Flood Insurance Program has a current liability of $20.5 billion, in part due to increased events such as hurricanes.
That shows the need to not only think about how to manage these risks after the fact, but how to deal with their severity in the first place. “Ultimately, we have to take climate change seriously in terms of mitigating these disasters, by using building codes, building in different ways, and doing everything we can to reduce greenhouse gas emissions,” Fall said. “There’s a lot of work that needs to be done beyond providing insurance—policy work that’s more focused on the health of the planet.”
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