Like a good neighbor, Allstate might not be there

The people of New York and New Jersey, the two places with the most destruction in terms of dollars, are now filing their insurance claims, which most of us would after such an event. But many people are finding that their insurance companies are reluctant to pay up for this super storm. People with hurricane insurance may think that they are protected from the floods that usually follow, but are shocked to learn that only wind related damaged is covered. To obtain flood insurance, the most common way is to buy a separate policy from the federal governments’ National Flood Insurance Program. If you were smart enough to purchase flood insurance through the federal government then you may have been lucky enough to escape dealing with insurance agents who make it difficult for you to collect your insurance check. But even the federal government is not without problems.

 The annual budget allotted for disasters in FEMA's budget has in recent years fallen short of the claims made. With hurricane sandy we see the same problem. So far the insurance claims have rise to 17.7 billion dollars, compared with only 3.5 billion that the federal government receives in premiums. This raises the debate on how accurate are these costs associated with flood insurance policies. Granted this was a freak of nature storm that caused excessive amounts of damage, but the ratio seems unreasonable. Insurance companies go bankrupt all the time over selling polices for to little and then not being able to cover the claims, so why is our own government in that position. Others argue that those on the east coast should receive less aid than what they have already gotten based on the fact that the east coast is known to have this time of extreme weather. Those people living there made a choice to accept the risks associated with that area, but are now relying on the government to pay for all the damage. The events that cost the federal flood insurance program the most money are repeat events, most notably areas built in flood plains. The problem is that when these houses are destroyed or damaged through flooding because they are located on a flood plain, they end up getting rebuilt in the same spot. So now in a couple years down the road, the same flood will happen, or maybe one at a larger scale, and the whole cycle repeats itself. 

Sources: http://www.nytimes.com/2012/11/11/realestate/reconsidering-flood-insurance-after-hurrican-sandy.html?pagewanted=all&_r=0
http://www.usatoday.com/story/news/2012/11/27/sandy-insurance-complaints-new-jersey/1728999/
http://www.nytimes.com/2012/11/13/nyregion/federal-flood-insurance-program-faces-new-stress.html?pagewanted=all&_r=0