Insurance gaps leave Michigan lakeshore properties vulnerable

People who have homes on the sandy, eroding shores of Lake Michigan don’t have a lot of protections when it comes to insurance coverage. 

Regular homeowners insurance does not cover flooding or any land movement, including erosion of the land beneath a structure.

Banks that give loans to lakefront homes require flood insurance, which could possibly provide some erosion coverage.

The Association of State Floodplain Managers Alan Lulloff says erosion that happens after a storm could be covered.

“Flooding that occurs due to a storm event where waves kind of overtop the shoreline and could cause some potential erosion. That can be covered,” Lulloff says.

But he says the flooding has to be pretty extensive, covering at least a few acres or impacting at least two neighboring properties. Lulloff says if erosion is happening over a longer period of time, that likely would not be covered.

Don Nowka, the owner of Bay View Insurance Agency, says flood insurance is a set rate, around $400 a month if you’re in a non-flood plain and in the thousands for lakeshore properties. 

The Federal Emergency Management Agency (FEMA) under the National Flood Insurance Program sets those rates. Flood insurance policies can be purchased from private insurance companies under an arrangement with the federal government or directly from the federal government.

Nowka says it’s unclear whether the unusually high water levels on the Great Lakes, that are causing damage to shorefront properties, would constitute an insurance claim.

“Is the federal government going to consider our current state on Lake Michigan and other waters to be ‘exceeding anticipated cyclical levels?’ I have no stinking idea,” he says.

FEMA offices did not respond to interview requests regarding erosion coverage.

The agency used to have a program called the Upton-Jones Amendment that was used extensively in Michigan in the 1980s during a period of high water. For building facing imminent collapse due to erosion, the federal government would pay the value of the building and demolition costs, or the relocation of a building. But, in 1994, the Upton-Jones Amendment was repealed, and since then no other program has helped cover the costs of properties crumbling from erosion.

This story was featured on Points North. You can find the full episode here.