FEMA is an insurance company

imgresThis is something that has been on my mind forever but because we were one of the many buildings, people, businesses etc whose fate was in the hands of FEMA to pay claims I never wrote about it.  Then this week there was an article in the NYTimes of the painful attempts of many who did not receive their full claims and have until 9/15 before the case is closed.

So here is our story.  We had insurance for our building and for many reasons we ended up going with an insurance company based in Florida for our building instead of Chubb.  Chubb is not for everyone.  They are expensive but not using them was our first mistake.  An insurance broker that our building management agency relied on gave us the option of going with a company called American Bankers.  I knew nothing of this company until after Sandy when I finally found it on the web.  There was nobody to talk to and it appeared to be a FEMA backed insurance company.

I am calling the insurance brokers daily if not twice a day post-Sandy.  They were overwhelmed to say the least.  Weeks and week of headaches, heartache and stress is an understatement.  People from the insurance agency came out to assess the property damage weeks after.  They stayed maybe 45 minutes and left.  We have zero idea when we will be reimbursed for the damage.  Don’t we have insurance for this?

Our building was not in a flood zone until after Sandy.  I have the maps that say that we are right next to the flood zone but not in it.  That changed after Sandy. We finally have a meeting with everyone in the building including the insurance broker and our managing agency.  Here is what we find out.  We have a FEMA backed policy. I went crazy.  If I had known that I would not have called the insurance broker daily for a month and btw I tortured them.  If they had been honest from the onset of what we had purchased I would have known immediately we were fucked.   Here is what that means.  Each month we have been paying American Bankers for insurance but who we are really paying is FEMA.  FEMA is an insurance agency.

Essentially we pay FEMA for these insurance policies that they guarantee through insurance companies (questionable) and when there needs to be payment back to the policy holder based on something like Sandy or Katrina they pay back (if you are lucky) less than 50% of what you need.  Now you can fight them which takes serious time, effort and money because they do not want to pay you anymore than that.  What they wanted, what they asked for, how they delayed it was atrocious.  We jumped through all the hoops several times to get what we were owed.  We never got fully paid back.  We are lucky because our building can afford to fix everything and just be pissed at the insurance agency. It won’t kill us.  For others who rely on that policy who can’t afford the extra it takes to actually put their homes back together is devastating.

I told our Senators about this.  They had no idea, truly.  Essentially FEMA is paid through insurance companies for policies held by them.  Then once they need to pay out they only pay out 25-40 cents on the dollar.  To put it bluntly our government takes money monthly from their people to insure them and then screws them by not completely covering them.  It makes zero sense.

Granted there are people who live in areas that are continually flooded so perhaps policies should change.  It should be like car insurance.  You can not drive out of the lot without insurance.  If you want to buy a piece of property that is in a flood zone then let the private insurance companies set policies (let capitalism work) and people will decide whether they can afford those policies or not and in turn make a decision if that piece of property (home) is worth acquiring.

There are plenty of families whose lives are still disrupted by Katrina (10 years later) and Sandy.  FEMA will never pay them full dollar for what their homes were insured for and they do not have the extra cash to rebuild.   I’ve never seen a reporter dig into this.  Someone should.  The next disaster will create upheaval in the community and peoples lives again and again but there should be some solace if you know that your insurance company has your back.  FEMA does not.



Comments (Archived):

  1. Erin

    Good for you for calling daily and not giving up. That takes grit.

    1. Gotham Gal

      It’s part of my DNA

  2. Jessica Isaacs

    60 minutes did a piece that touches on a few examples that illustrate the insurance nightmare of sandy. albeit a subset, itrepresents the horror people are still going through. http://www.cbsnews.com/news

  3. Ella Dyer

    Wow, that is shocking; thanks so much for your candid comments. Yes, everyone should know about this and; those who do benefit (probably not the policy holders) should be taken to task!

    1. Gotham Gal


  4. pointsnfigures

    I feel your pain. In August of 2001, we lost our entire house to a freak flood. We had private insurance (not Chubb) and it was murder dealing with them to rebuild. I cannot imagine what that process would have been like had it been FEMA. You are correct, Chubb is very expensive and not for everyone. But the people I know that have secured policies with Chubb don’t have problems collecting. Obviously, my sample size is anecdotal.The one thing that happened to our family is that we were living in a hotel when 9/11 happened. we got perspective. One if my best buddies died in October 2001. Our problems didn’t seem so large.Hope you get the money you deserve. The pain and suffering won’t feel so bad then.

  5. ellen sing

    Most of my friends think that I am crazy but i try to get what I think is the best insurance I can. Sometimes the premiums are outrageous, and you could self insure with the premium money spent. My car insurance cost 25 percent more than other companies might charge, but when I get into an accident, they are wonderful. I haven’t, thank heaven, needed my homeowners at all. That premium is hefty, and I know that if you have a few claims that they will drop you so, for me, it is like catastrophic health insurance. I won’t use it unless something really horrible happens. I do feel your pain though. You pay for an appraisal value and then they knock you down to a lot less. For argument sake let’s say you pay a premium for a house valued at $100,000. The house gets destroyed. It is very rare that they will give you the whole 100,000 to rebuild it. I used to be with aig and now am with someone else and I am going to investigate who owns them. I was going to go with chubb, but my insurance agent liked another company also.

    1. Gotham Gal

      Chubb is the best. They are there when you need them.

  6. ellen sing

    I am with Ace insurance which from their website said that they were acquiring Chubb.

  7. daryn

    Wow, f’d up…

    1. Gotham Gal


  8. JLM

    .There is a very simple answer to all of your insurance needs.USAAYou know who they are. You know who runs them. You know where their building is. They are accessible 24/7 via voice, email, mail. They are real.If you have a claim, they pay. They pay promptly. They are real. They are accessible. They are the best insurance company in the US.Because Fred’s father is retired military, you are eligible.I was renovating a property. The roof was off. There were three Texas thunderstorms that ruthlessly poured into the rooflessness. USAA was there the next day. I got my check within 3 days. They gave me way more than I deserved. They paid to fix stuff I told them I was going to wreck out anyway.They said, it was damaged. We pay.I can tell you four more stories or you can just get your insurance from USAA.I have also found them to be the cheapest for everything but every time I need them 24/7, they have been there. You will have to find something else to write about as you will never have another bad insurance story. Ever.USAAYou’re welcome.JLMwww.themusingsofthebigredca…

  9. candice

    You mean NFIP, right? That’s everyone’s insurance for flood here (nola) and if you’ve got a mortgage you’re required to have it. State Farm/Allstate, etc, they do not cover flood directly but they broker flood.The whole “lack of wholeness” was covered in local media here a good bit. The cap is $250k for an ordinary single-family home, with our current real estate bubble, decent starter houses are going for more than that. I’m afraid to buy a house here. I realize $340k for a house must sound like peanuts to you (the bungalow around the corner), but our real estate is double the price it was 10 years ago, and you’re pretty much guaranteed to not make your house back with insurance if the worst comes.Like y’all the best rebuilt areas were those where people had enough savings to get started while in the process of arguing with insurance.

    1. Gotham Gal

      You are absolutely right….cap and must have through insurance agencies. I would be afraid to buy too after understanding the reality of insurance in flood zones. It affects the value of your property. It’s scary. It also sucksThe monthly fee is based on risk equations realizing what they will pay you if there is a flood. It’s one thing coming from an insurance company that is in the business of risk but it’s a whole other ball game coming from our government.

  10. panterosa,

    We had a massive leak years ago, and the damage paybacks were for a totally non-replicable labor and materials cost which did not cover what it would cost us to fix the damage where we lived.Medical insurance is the same, with lowballed costs. I hate insurance.Product Liability insurance is my new bete noir. I’m sure you have some companies which need it. I am floored by how much companies have to pay if anything is made in China, and won’t want to produce there. Do you have an opinion on made in US vs China via costs for the customer, and or how the company has to figure in costs of Chinese made goods? Curious.

    1. Gotham Gal

      When I was in the garment center China really came into play. Lots of manufacturing went there. Consumers in the states wanted to be made in America but they didn’t want to pay for our labor force. Because of technology the cost to manufacture something here or in China is not as dramatic. It depends on the type of good. I don’t know what the additional costs are for insurance but the model makes sense to me.I do know when you manufacture hard goods that insurance is higher due to possible injury and risk.