The Most Expensive Piece of Paper in Your Filing Cabinet
Owning a home in New Orleans means accepting certain truths. The foundation will shift. The plumbing will be mysterious. And every year, you will write a check for flood insurance that is large enough to make you briefly consider whether you actually need walls and a roof or if you could just live under a tarp.
Flood insurance in New Orleans is not optional in the way that, say, earthquake insurance is optional in most of California. If you have a mortgage, your lender requires it. If you do not have a mortgage, you are either very wealthy or very optimistic, and in either case, you should still have it, because this is a city where water comes from above, below, and sideways, sometimes all at once.
The NFIP and You
Most flood insurance in the United States is administered through the National Flood Insurance Program, a federal program that was created in 1968 and has been financially underwater — no pun intended, but accurate — for most of its existence. The NFIP is currently billions of dollars in debt, largely because of payouts from Katrina and subsequent storms, and it periodically threatens to restructure its rates in ways that make New Orleans homeowners break out in a different kind of sweat.
The rates are determined by flood maps that attempt to quantify how likely your particular piece of ground is to end up under water. In New Orleans, where the entire city sits in a bowl surrounded by a lake, a river, and the Gulf of Mexico, those maps are essentially a document that says "yes" in varying shades of severity. Your flood zone determines your premium, and your premium determines whether you can afford to own your home or are merely renting it from the insurance company on an annual basis.
The Rate Hikes
Every few years, Congress revisits the NFIP and decides that rates should more accurately reflect actual risk. This sounds reasonable until you realize that "actual risk" for a city eight feet below sea level translates to premiums that could rival your mortgage payment. Risk Rating 2.0, the most recent overhaul, individualized rates based on property-specific factors like distance to water, elevation, and replacement cost. For some New Orleans homeowners, rates went up dramatically. For others, they went down. For everyone, the annual envelope from the insurance company is opened with the same mix of dread and resignation.
The Cost of Living Below Sea Level
Flood insurance is the invisible tax on life in New Orleans. It does not show up on a restaurant menu or in the price of a concert ticket, but it is embedded in the cost of every home, every business, every decision to put down roots in a place that water wants to reclaim. It is the price of the levees and the pumps and the engineering that keeps the city dry on good days. And on bad days, when the pumps fail or the rain overwhelms or the storm pushes the lake over the walls, it is the only thing standing between you and financial ruin. So you pay it. You grumble about it. You file it in the cabinet next to your homeowner's policy and your will, and you hope that this year, like most years, it is money spent on peace of mind rather than on an actual claim.
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