Under-Insuring Can Cripple a Home

July 26, 2004 -- When Hurricane Isabel swamped the Atlantic coast last September, Joan Buchanan watched helplessly as 2 feet of black ocean water flooded her home in Hampton, Va. And like many hit with weather disasters, her insurance didn't cover all the damages. Months later, she still doesn't know if her home can be repaired.

Buchanan, 47, who shares her home with her disabled mother, is among the more than 50 million Americans who live in coastal areas that are at-risk during the June-to-November Atlantic hurricane season.

And according to some insurance experts, many of those at-risk people are rolling the dice with inadequate insurance.

Though Isabel's wind speeds had slowed considerably by the time it hit land, heavy rain and rising tides flooded communities and destroyed homes along Virginia and Delaware shores. The storm caused an estimated $3.4 billion in flooding and related damages to U.S. homes and businesses.

Nine months later coastal residents are still cleaning up, some without the benefit of insurance payouts. Instead of recouping their losses to replace everything that was destroyed, Buchanan was engulfed by a swirl of governmental red tape and insurance fine print. Now, faced with the prospect of paying thousands of dollars out of their own pockets for repairs, they are wondering if they may be forced to leave their home of the last five decades.

"My mother and I have thought about moving," Buchanan said. "But it's a nice community and a nice place to live, and where would we go?"

Hurricanes cause an average of $5 billion damage every year in the United States, according to statistics kept by the National Hurricane Center, a division of the National Atmospheric and Oceanographic Association, or NOAA. And that number has been climbing as hurricanes caused above-average financial damage in seven out of the past eight years.

This year, NOAA forecast another above-normal Atlantic hurricane season, predicting 12 to 15 tropical storms and two to four major hurricanes will hit the U.S. sometime this year. If any of those elevate to the level of Isabel, many Americans could find themselves in need of financial support.