Flood Insurance – Once the Mississippi or Missouri rivers are flooded, it’s too late to buy
If floodwaters have already flowed through the Missouri River or Mighty Mississippi and that water is running down your street, then it is too late to purchase 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 make sure it is covered by the National Flood Insurance program, is before the rainy season or severe snowmelt during heavy snow seasons.
In fact, when the snow cover exceeds 100%, and this happens on the West Coast during El Niño seasons, you will likely find that the country’s flood insurance companies are not very willing to write policies and remember the rainy season and snow cover. in that case they happen six months before the floods, when that snow melts. The same is true when purchasing insurance to protect your home from hurricanes that produce storm surge or storm surge.
Many companies will not sell you insurance at or on that date the hurricane season begins. They want to sell you the insurance after the hurricane season, so that you pay into the system for a while, before they want to pay any claims. Similarly, you obviously can’t buy earthquake insurance during an earthquake, or exactly after, while there is still the risk of aftershocks.
As we watch the floods in the spring and summer of 2011 in the Midwest, and along the Mississippi in the South, we feel for all those people, and no American wants his fellow citizens to flood. Of course, there is not much you can do for them once the water begins to flood, levees break, or dams open to prevent flooding from escalating and causing catastrophe in a city with millions of people in it.
We cannot expect insurance companies to sell insurance by the time the Army Corps of Engineers releases data in the media that floods are coming and are likely to overflow the banks of these giant rivers. By then it is too late and insurance companies are not stupid, they will cut all insurance policy sales at that time. Remember that insurance companies are in business to make money, and they do so by assessing risk and betting on probability.
Therefore, if there is a high probability of major flooding, they will not put their shareholders, or the earnings or retained assets of the insurance company, at risk. In fact, I hope you 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.