Flood Insurance Pays More Than FEMA — But Few Vermonters Have It

Luke Mulligan on the footbridge he built across the Winooski River Credit: Anne Wallace Allen ©️ Seven Days

Last week’s flooding left Luke Mulligan and his family stranded when the raging waters destroyed a town bridge that connected them to Route 2 in Marshfield. They lost a field of hay, too.

But Mulligan thinks he might be one of the lucky ones. Unlike most property owners in Vermont, he has flood insurance.

“Honestly, I don’t know how I got it,” said Mulligan, whose farm sits on the bank of the Winooski River, which overflowed and tore out the bridge on the evening of July 12. “[The insurance company] never inspected; their office is in Massachusetts.”

Mulligan knows his century-old farmhouse — which is on high ground and was untouched by the floodwater — is covered, but he doesn’t know if the insurance will reimburse him for his ruined crop of hay, along with six round bales from last year.

In the meantime, Mulligan has built a long footbridge to connect his family to the road. He hasn’t had time to check his policy details to see if he’ll get back the money he spent building the bridge, which the town will replace. He also missed time at work.

“I kind of just got busy building instead of trying to chase it down,” he said.

In Vermont, as in the rest of the country, few people purchase a special insurance policy to protect them from flooding, an event not covered in the typical homeowners’ policy. Only about 3,000 Vermont households — or 1 percent of the entire state — have flood policies, according to Kevin Gaffney, the commissioner of the Department of Financial Regulation. Another 800 businesses do, he said.

The share of Vermont property owners who have purchased flood policies hasn’t budged in years. Even Tropical Storm Irene didn’t make a difference, Gaffney said.

People don’t see a reason to buy flood insurance if their homes don’t normally flood, said Emile Willett, the assistant vice president of underwriting at Union Mutual. The Montpelier-based company also flooded last week, displacing staff.

For most people, “in 100 years, the place has never flooded, so their bank didn’t require them to buy flood insurance,” Willett said. “But unfortunately, we got historic floods, and now those poor folks are probably going to have to reach out to FEMA.”

Homeowners’ policies usually cover localized water damage, the kind that arises from a leaky roof or faulty appliance. But they specifically exclude floods such as the one that overtook sections of Vermont last week. Flooding policies are a completely different commitment for insurance companies, Willett said, because they tend to involve a large number of homes in the area.

“There’s a larger likelihood it’s going to be a catastrophic event for the insurance company,” he said.

Gaffney stops short of urging Vermonters to buy flood insurance. The department did run a campaign in May — Flood Preparedness Month, Gaffney said — with information about the National Flood Insurance Program, a federally subsidized FEMA program that provides most of the flood policies in the country at lower-than-market rates. Most Vermont policies have been purchased through the NFIP, Gaffney said; a few hundred are insured through the private market.

Gaffney said he knows flood policies are out of reach for many. According to FEMA, the typical cost of an NFIP policy for a single-family home is more than $2,000 per year.

“It’s a costly item, and when you step back and think about some of the critical economic hurdles right now, housing costs being one of them, it can be a roadblock for someone obtaining a home,” Gaffney said.

It’s too early to say how much Vermonters will end up paying to repair or replace what they lost as a result of the flooding. Many are still shoveling the mud out of their structures and haven’t even reported their losses yet.

But a January 2022 study from the University of Vermont estimated that state property damages from flooding would exceed $5.2 billion over the next 100 years, mostly along the Winooski River floodplain.

FEMA programs that help homeowners and businesses after disasters will cover some of this summer’s losses, but most of the aid that’s available comes in the form of loans, not grants. And the typical FEMA grant is just $3,000, compared to $66,000 for a flood insurance damage claim, according to Rob Moore of the Natural Resources Defense Council.

Moore wrote a scathing analysis of Vermont’s response to its flooding risk, saying the state could do much more to protect homeowners by revising its building codes and requiring home sellers and landlords to disclose prior flooding problems. Vermont’s own state-run Flood Ready website has flagged that as a problem.

Moore also said FEMA needs to update its flood maps. “Because Vermont and FEMA’s flood policies fail to anticipate and account for climate change, more people’s homes are flooding, the amount of damage may be more severe than in years past, and the recovery time will be a lot longer,” Moore wrote.

Connie Rae, who owns the Inn at Water’s Edge in Ludlow, estimated that her family will spend $40,000 to $50,000 to replace some beach stairs, a patio, a pergola and a dock that were swept away by the Black River last week. The inn is insured for flooding, she said, but not the rest of the property.

“I get it; the beachfront isn’t covered in our policy, but it’s just one of those things you don’t expect,” she said. “We have flooding every spring, but it’s not like this.”

For more flood-related resources, visit vem.vermont.gov/flood.