Of all the things financial advisors and their clients worry about in connection with investments, it's hard to believe that one of the greatest potential wealth destroyers can be a natural phenomenon: rain.
Today's unexpected and unusually heavy rainstorms are wreaking havoc on homes, leading to costly repairs and remediation efforts. Because flood and surface water damage is not covered by most homeowners and renters insurance policies, all too often families must tap — and deplete — their investment nest eggs to resume normal living.
Water and flooding damage are nothing new, of course, especially to those living near rivers in the Midwest and along the nation's hurricane-hit East and Gulf Coasts. But today, in broad swaths of the country where flooding has historically been rare, people are experiencing the physical, emotional and financial pain that too often accompanies sudden, overwhelming downpours.
Flood insurance is an answer, of course, but the Insurance Information Institute estimates that only about 12% of American homeowners had such a policy in 2016, down from the 14% who had the coverage in 2015. The percentage of homeowners with flood insurance was highest in the South, at 14%, and lowest in the Midwest, where just 8% had flood insurance.
Flood insurance is available from the federally-backed National Flood Insurance Program (NFIP) and from some private insurers. NFIP policies typically can insure a residential building's structural elements up to $250,000.
Flooding risks are great in dollar terms. Statistics from the Federal Emergency Management Agency show that just six inches of water damage causes a loss of $52,039 in an average-size home, while a foot of water costs $72,162 and a four-foot inundation results in a $103,355 loss.
No one, least of all clients, expects a financial advisor to be a flood insurance expert, but alerting clients to the need to protect themselves and their nest eggs from this all-too-real threat demonstrates your holistic approach to wealth management and your value as a trusted advisor.
