Sunday, 18 November 2012

That Flood Insurance Stuff

Somewhere, hidden in all the Hurricane Sandy updates....you will find this interesting note.  The kindly folks at FEMA who run this flood insurance deal....are deeply in debt.  Course, this is the US federal government, and it shouldn't really matter to you....the common citizen.

After Hurricane Katrina....the FEMA guys were so deep into debt, that they borrowed around $18 billion (BILLON) from the US Treasury, because their fund was so weak.

Naturally, if you were a real insurance company, you'd have some meetings and discuss this.  Well....there's a problem in the way that we manage the insurance fund, from a federal prospective.

You see....we felt so sorry for people who lived by rivers, lakes and coastal areas....that we actually gave out this under-priced policy.  We arranged a subsidy program where you could demonstrate your business or your lifestyle was such....that you only had to pay half of what the flood insurance ought to be.

Nice people that we are....we aren't really the type that ought to run an insurance program.  We are the types that would bankrupt a fund....if we were pretending to be real insurance folks.

So the fund is still in trouble left over from Hurricane Katrina, and will be more deeply in debt after Sandy's cost is figured up.

Not that this is the worst of the news....if you read the Wall Street Journal....you'd find out that the most that a general homeowner can claim under such federal insurance.....is $250k for the house and $100 for the contents.  If you did have a house worth over $380k....well....there's a problem here in that you need to find another $130k for the construction costs.  And you have to figure....folks never did accurately figure out what it'd cost to replace the old house if it did get knocked down.

So by January....when the smoke and surf has cleared....a guy will be standing there on Staten Island with his $500k house being knocked down by the city government because it's not safe to live in.  The FEMA check will arrive for $250k, and if you can document your contents (maybe you were smart enough to keep pictures and receipts....but they are long gone because of the storm)....you might get the other $100k for contents.  Then what?

The rest of us...in two to four years will eventually figure out that the flood insurance fund is mostly bankrupt and we are holding the 'promise' here.  And we aren't going to be happy over that subsidy deal for the 'poor' folks.

Yeah, we've got a bit of sand and grit in our teeth, and we aren't exactly happy.

I'm guessing some Staten Island folks won't be returning....ever.  It was the end of an era.

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