If flood waters have already crossed the Missouri River or the Mighty Mississippi and the water is running down your street, then it’s too late to buy flood insurance. It often reminds me of the famous quote; “When did Noah build the ark? Before the flood, remember?” In other words, the time to buy your flood insurance, or to make sure you’re covered by the National Flood Insurance program, is before the rainy season or severe snowmelt during periods of heavy snow.
In fact, when snowpack exceeds 100%, and this happens on the West Coast during El Nino seasons, you’re likely to find that the nation’s flood insurance companies are reluctant to write policies and remember the rainy season and snow cover. in that case they occur six months before the floods, when that snow melts. The same goes for buying insurance to protect your home from hurricanes that produce storm surge or tidal waves.
Many companies will not sell you insurance at or around the time hurricane season begins. They want to sell you insurance after hurricane season, so you pay into the system for a while, before they want to pay any claims. Likewise, you obviously can’t buy earthquake insurance during, or right after, an earthquake while there is a risk of aftershocks.
As we watched the flooding in the spring and summer of 2011 in the Midwest and along the Mississippi in the South, we felt sorry for all of those people, and no American wants to see their fellow citizens inundated. Of course, there isn’t much you can do for them once the water starts to flood, levees break, or dams open to prevent floodwaters from rising and causing catastrophe in a city with millions of people.
We can’t expect insurance companies to sell insurance by the time the Army Corps of Engineers releases media reports that flooding is coming, and likely to overflow the banks of these giant rivers. By then it’s too late, and insurance companies aren’t stupid, they’ll cut off all insurance policy sales at that point. Remember that insurance companies are in business to make money, and they do so by evaluating risk and taking that bet based on probability.
Therefore, if there is a high probability of major flooding, they will not put their shareholders or the insurance company’s profits or retained assets at risk. In fact, I hope you’ll consider how the free market works and buy your flood insurance long before you really need it. Because if you wait, it will be too late.
