SUSAN STAMBERG, host:
And time now for business news.
Hurricane Katrina is expected to be the nation's most expensive natural disaster. Most homes in the area are insured against wind damage but not against flood damage, which means many people could lose everything. NPR's Kathleen Schalch reports.
KATHLEEN SCHALCH reporting:
Joel Blazek never thought he'd never see the day when his home was underwater. It's in Chalmette, just outside New Orleans.
Mr. JOEL BLAZEK: We're high and dry in previous hurricanes, including Betsy, which was the last hurricane that devastated New Orleans. The flood walls, at that time, had also broken, during Betsy, and the water had come into St. Bernard Parish but had never flooded where we lived because we were on a ridge.
SCHALCH: Blazek doesn't have flood insurance. Most of his relatives don't either.
Mr. BLAZEK: As a matter of fact, my daughter just bought a house three blocks down the street, and when they went to sign the mortgage payments, they were advised they don't even need flood insurance.
SCHALCH: The last time Blazek saw his house, it was under eight feet of water. The family survived, but their financial losses could be staggering. Homeowners insurance doesn't cover flood damage. The federal government sells flood insurance, but it can cost hundreds of dollars per year. Most people don't buy it unless their mortgage company makes them. Lenders only require it for buildings in floodplains likely to get inundated at least every hundred years. Houses protected by levees that are certified by the Army Corps of Engineers don't have to be insured, so most aren't. Carolyn Gorman is a vice president at the Insurance Information Institute.
Ms. CAROLYN GORMAN (Vice President, Insurance Information Institute): We believe that in Alabama and Mississippi perhaps only 10 or 20 percent of the people who should have had flood insurance actually have it, and in Louisiana, it looks like about 46 percent of the population has flood insurance.
SCHALCH: Robert Wooley, Louisiana's commissioner of insurance, says a lot's going to hinge on exactly what caused the water damage.
Mr. ROBERT WOOLEY (Commissioner of Insurance, Louisiana): Some policies will cover what is called wind-driven water which we normally hear on The Weather Channel as storm surge. So you may--and I say may--have a policy that has such a coverage. There are some policies that totally exclude any type of water that enters your structure any other way than through a hole caused by the storm.
SCHALCH: Many cases may wind up in court according to Douglas Heller of the Foundation for Taxpayer and Consumer Rights.
Mr. DOUGLAS HELLER (Foundation for Taxpayer and Consumer Rights): The insurance industry is going to bring out all kinds of engineers that say, `Well, did the damage come from the top down or from the side?' and try to come up with the explanations of why this was the flood.
SCHALCH: Heller argues that since the wind caused all the flooding, the insurers ought to pay, but Wooley disagrees. He says insurers haven't collected premiums or set aside money for this.
Mr. WOOLEY: And you're going to bankrupt insurance companies, and the people who have legitimate wind claims behind those folks that didn't get there quicker, they're going to have no money.
SCHALCH: He says he will push FEMA to help uninsured flood survivors with low-interest loans instead.
Kathleen Schalch, NPR News, Washington.
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