The FEMA flood claims process is not easy, and there's a lot you only learn from other people who went through it themselves after flooding.
Over the summer, after the Memorial Day Floods hit just three blocks from our home in Houston, I threw myself into all things flood insurance.
Over a three-part series, I delved into the financial implications following a flood disaster, people's real experiences when filing their first flood insurance claims, and lots of things to be prepared for in the awful event that you might have to do so in the future.
And you know what? I found many surprises in the FEMA flood claims process. I want to share them with you so that you might not get surprised in the future.
Surprise #1: Basements and Cars are Not Covered
While sitting in a coffee shop writing articles, I overheard one of my neighbors talk about how his car was totaled in the floods and he was having to replace it. Thankfully, he had enough coverage with his car insurance company, as he would have been out of luck if he was relying on flood insurance to help with that.
Besides cars, basements are not covered. However, some items within the basement that are integral to the home/the home’s functioning are covered. For more info, check out FEMA’s list.
Here is a link to a standard flood insurance policy to give you an idea of what it does and does not cover.
USAA offers flood insurance policies, so you might want to go through them (we switched to them).
Surprise #2: You Might be able to get Financial Help Even if You Don’t have Flood Insurance
Things like FEMA Disaster Assistance and funds set up by your local area in the event of a disaster are specifically to help uninsured and underinsured folks out. You shouldn’t bank on this type of aid, but it’s good to know it might be available. In the event of a flood — whether you’re insured or not — be sure to register with FEMA Disaster Assistance. Also check into FEMA’s housing and repair assistance program.
Surprise #3: You Could get a 10-20% Higher Claim Payout by Getting Your Own Contractor Quotes
When I attended a local meeting hosted by Mostyn Law Firm, I was surprised to find out (by both the law firm and by several people in the audience who had recently gone through the adjuster/claims process) that getting your own quotes by local contractors who will be completing the jobs will likely lead you a higher claim. This is because adjusters that come from out of town use software to estimate damages, and the software doesn’t necessarily reflect the new local economy of a disaster area (where everyone is trying to get labor and construction materials, so the cost has risen).
Another way to potentially get a higher payout than you would by just going through your insurance company? Hire a Public Adjuster. See #4 below for more info.
Surprise #4: You Don’t have to Agree with Your Insurance Adjuster’s Assessment
You have to submit a Proof of Loss form — your statement of the amount of money being requested — within 60 days of a flood event (unless an extension has been given, which did happen in the Houston Memorial Day Floods).
Your adjuster’s estimates and assessment of damage will be on this form, and you have to sign it.
However, you don’t have to agree with it. If you don’t think their figures are right, then Mostyn Law suggests that you put something along the lines of the following statement above your signature (so that you can still get your form in on time): “I disagree with this amount; however I’m signing it so that I can get the money that’s there.”
This may give you wiggle room later when appealing the amount, while still getting this very important form in within the 60-day deadline.
What can you do next? You could hire a Public Adjuster, who is not affiliated with your insurance company. There are fees associated with using them, somewhere around 10% – 12% (though could be higher in states that do not cap the fees). You can also check out FEMA's has several suggestions for what to do when you don't agree with your adjuster.
Lastly, here are tips from Consumer Reports on how to handle working with an Insurance Adjuster.
Surprise #5: You Cannot Collect Attorney Fees If You End Up Suing Your Insurer or FEMA
Unlike homeowner’s insurance, if you end up suing your insurance company or FEMA for more money from your flood insurance through the National Flood Insurance Program (like this couple is doing), you can’t actually collect attorney fees on top of any winnings.
Surprise #6: Living in a Flood Hazard Area Might Dictate How You Move Forward
If your home is in a flood hazard area and is considered damaged beyond 50% of its appraised value, then FEMA dictates you will need to elevate and bring your home into current compliance standards. This means you will have to pay for code updates and upgrades, as well as elevate it. The most you can get from within the maximum policy amount ($250,000) to comply is $30,000. Yet raising a home is likely to cost you six figures (one man told me his quote was $125,000! Here's another example of how expensive this can be). Your four options are: Elevate, Relocate, Demolish, or Floodproof.
Surprise #7: You Can’t Get a Loan and a Grant, and Grants Take a Lot Longer to Come Through
After a flooding disaster, your home is likely to be unlivable. So you will need to find temporary housing, pay deductibles, and keep paying your mortgage (if you have one). Check out this post for what to do from a financial perspective (and specifically what happens if you don't have flood insurance).
Because of having to pay for lots of things at once, some people take out low-interest, Small Business Administration Disaster Loans.
However, there also may be grants coming down the pipeline. A post-disaster grant may get passed by your city or FEMA — such as FEMA Flood Mitigation grants and Hazard Mitigation grants. However, Catherine Dunn, the district director for Texas State Representative Sarah Davis let me know that, “Federal law prohibits a homeowner from receiving federal assistance after a disaster from more than one source. If someone takes out an SBA loan now, they will be ineligible for grant assistance should it become available down the road. This has put many homeowners in a bind in regards to what they should do.”
How long might you have to hold out? Grants showed up 3-6 months after Hurricane Sandy to the state of New Jersey, and the average turnaround time, if there will be funds, is 8 months according to Catherine.
Surprise #8: You have to Cover Your Costs from this Disaster Until Your Claim Comes through
Perhaps not entirely surprising, but this one could really catch you off guard (especially if you don’t have a cushy savings account or a high limit on a credit card to see you through).
One flood victim I interviewed, Patricia (Pat) Merritt, had a check cut to her. “…[The adjuster] couldn’t tell us exactly how much the insurance would pay until he feeds his numbers into his software program, but it looked to his experienced eye to be in the $85,000 to $115,000 range. This is structure only. The contents are handled entirely differently…[Our] adjuster said he tried to get the money to the policyholders within 30 days of his visit. FEMA Fed-Exed me a check for $15,000 to get started. I am financing the repairs out of pocket at this time.”
Another flood victim I interviewed, Leonor Rouse reports, “Length of time adjuster takes and time to get check is between 60-90 days.”
Surprise #9: Your Property Taxes, even if You Don’t Flood, Will Likely Decrease for the Next Year
Finally a happy financial surprise!
You might have to put in the paperwork to make this happen — as I’m sure many tax jurisdictions aren’t eager to see their tax revenue go down voluntarily. But if your area experiences flooding, whether your personal home is spared or not, then the property values of all the homes will likely decrease at least temporarily. In our city, you can only raise the appraisal amount by 10% each year, so fight property taxes could reap you savings for years to come.
Surprise #10: You Might Owe Money Back to FEMA
One more financial point I'd like to bring home.
It's super-important to understand the difference between a loan and a grant — and which one you're getting — when you get assistance/apply for assistance after a flood disaster.
For example, Federal Disaster Assistance is generally in the form of a low-interest loan. And the Small Business Administration also gives out loans to homeowners to help with post-flood relief.
But there might be other reasons why you would get a Notice of Debt Letter from FEMA.
- Duplication of benefits with a household member
- Duplication of benefits with insurance
- Damaged dwelling wasn’t your primary residence
- Failure to maintain flood insurance on damaged dwelling
- Erroneous calculations
- Misspent the money
For lots more information on the realities of flood insurance and the flood insurance claims process, be sure to check out my Flood Insurance Crash Course Series.
Flood Insurance Crash Course Series:
Flood Insurance Crash Course Part 1: Do I Need Flood Insurance?
Flood Insurance Crash Course Part 2 : What Does Flood Insurance Cover + What the Claims Process Looks Like
Flood Insurance Crash Course Part 3: How It Would have Gone if We Had Flood Damage
Flood Insurance Crash Course Part 4: 10 Surprising FEMA flood Claims Money Realities I Learned
Flood Insurance Crash Course Part 5: We Submit Our First Flood Insurance Claims Process