Homeowners Insurance

Modern Building Codes Could Prevent $1.6 Billion in Natural Disaster Damages Annually

Modern Building Codes Could Prevent $1.6 Billion in Natural Disaster Damages Annually

With 65% of U.S. municipalities not adhering to modern building codes, these states could prevent the most losses by updating their properties.
A commercial building construction site.
A commercial building construction site. Source: Getty Images

Amid a year of extreme heat and flooding across much of the U.S., the latest ValuePenguin study highlights that adopting building codes established in 2015 or later could help property owners avoid hefty financial losses from certain weather events. Our study, which analyzes data from the Federal Emergency Management Agency (FEMA), shows that properties across the U.S. could avoid more than $1.6 billion in damages annually.

"While one of the most cost-effective ways to safeguard properties against natural disasters is to adopt and follow hazard-resistant building codes, almost two-thirds of the country hasn’t adopted them," says ValuePenguin home insurance expert Divya Sangameshwar. "At the same time, natural disasters are becoming increasingly common and more destructive due to climate change."

Keep reading to learn which states could prevent the most damages per building and how much of these potential annual losses impact homeowners directly. Because homeowners insurance doesn’t cover property upgrade costs, stick around for tips to increase your property’s resiliency without breaking the bank.

Key findings

  • Adopting building codes established in 2015 or later could prevent $1.6 billion in annual losses from flooding, hurricane winds and earthquakes. That’s around $129 per analyzed building across the U.S. Updating homes would prevent the most losses. Of the $1.6 billion in total potential losses, about $1.1 billion would affect one- and two-family homes.
  • By event type, most losses could be prevented by meeting hurricane-resistant building codes. Of the $1.6 billion in potential annual losses, around $1.1 billion comes from potential hurricane wind damage. Separately, meeting flood damage building codes could prevent $483.6 million annually in potential losses, while meeting seismic building codes could prevent $59.9 million annually in potential losses.
  • Overall, Wisconsin could prevent the most losses per building. By adopting the latest building codes, properties in Wisconsin could prevent $2,416 in annual disaster-related losses per analyzed building. Indiana and Arizona ranked second and third, with average avoided losses of $1,704 and $1,543 per building, respectively.
  • Properties in the District of Columbia could prevent $2,499 in flooding losses per analyzed building — the most of any state affected by flooding. Meanwhile, Florida could prevent the most wind losses ($514 per building), while Hawaii could prevent the most earthquake losses ($56 per building).
  • New Hampshire and Vermont would save the least money by adopting modern building codes. New Hampshire and Vermont are the only two states where potential avoided losses are below $1 per analyzed building. In New Hampshire, adopting the latest building codes would prevent just 12 cents in annual losses per building. In Vermont, that figure is 78 cents.

Adhering to modern building codes could prevent $1.6 billion in annual losses

In total, Americans could prevent $1.6 billion in annual losses from floods, hurricane winds and earthquakes by adopting modern building codes in structures built in 2000 or later. That’s around $129 per analyzed building across the U.S. These findings come as FEMA reports that 65% of U.S. counties, cities and towns haven’t adopted modern building codes.

Though all structures would benefit from adhering to modern building codes, updating homes would prevent the most losses. Around $1.1 billion of the potential annual losses would affect one- and two-family homes, comprising 68% of all potential losses. That compares to:

  • Commercial buildings: $279.1 million in potential annual losses (17%)
  • Other residential buildings: $162.4 million in potential annual losses (10%)
  • Other building types: $60.6 million in potential annual losses (4%)
  • Industrial buildings: $15.5 million in potential annual losses (1%)

It goes without saying that $1.6 billion is a hefty amount to lose — particularly on an annual basis. But it’s also important to note that the expected losses may only get more expensive.

FEMA uses historical data in its expected loss calculations. Namely, the agency looks at the annual frequency of disasters and the historic loss ratio (how much damage a particular natural disaster has caused). However, the number and cost of weather and climate disasters are increasing in the U.S. — this is due to a combination of factors, including an increasing number of buildings that are at risk and the fact that climate change is increasing the frequency and intensity of some types of extreme weather events.

FEMA’s Expected Annual Loss calculations also include analyzing the number of buildings exposed to a natural disaster. However, its risk models have only just begun to account for climate change. In fact, another ValuePenguin study on flood risk found that FEMA underestimated the number of properties at risk for flooding compared to other, more comprehensive flood models.

Majority of potential losses come from wind damage

We analyzed three different damage types: hurricane wind, flood and earthquake damage. Of the $1.6 billion in total potential losses, around $1.1 billion comes from potential wind damages — the most of any damage type examined. This comes as more than 9.2 million properties are at risk for potential hurricane wind damages.

Average annual losses avoided by damage type

Damage type
Total buildings analyzed
Total losses avoided
Hurricane wind9.2 million$1.1 billion
Flood786,473$483.6 million
Earthquake2.4 million$59.9 million

Source: ValuePenguin analysis of FEMA Building Codes Save study

Meanwhile, meeting flood damage building codes could prevent $483.6 million in potential losses for 786,473 properties, including properties at risk for coastal and river floods. Meeting earthquake building codes, on the other hand, could prevent $59.9 million in potential losses for more than 2.4 million properties at risk of earthquakes.

While flood damage models included the 50 states and the District of Columbia, just 23 states were included in wind damage models and six states included in seismic damage models, as they were the only ones with hurricane and earthquake building codes, respectively. Therefore, the number of buildings impacted in each model may not reflect the full number of buildings impacted during an extreme weather event.

States that could prevent the most losses

While FEMA analyzed 18.2 million buildings constructed in 2000 or later across the U.S, only buildings with sufficient data were included in its model. In total, 12.4 million buildings were included in the three disaster models. Because the number of buildings included in the model varied by state, we also looked at the potential losses avoided per analyzed building.

Overall, Wisconsin could prevent the most losses on a per-building basis. By adopting modern building codes, properties in Wisconsin could prevent $403,486 in potential disaster-related losses per year — that’s $2,416 per building. However, the potential savings may be much higher. Although FEMA includes just 167 Wisconsin buildings in its model, Wisconsin has 42,023 buildings constructed in 2000 or later.

Notably, FEMA classifies two Wisconsin counties as high-hazard, high-growth areas, meaning areas that have a large number of post-2000 buildings exposed to significant hazards. In those high-hazard, high-growth counties in Wisconsin, Dane has over 9,000 post-2000 buildings, while Kenosha has over 8,600.

Wisconsin’s potential losses consist entirely of potential flood damages. In total, 368,670 properties in Wisconsin have a chance of being severely affected by flooding over the next 30 years, according to the First Street Foundation’s Risk Factor, largely from heavy rains. This represents 3% of all properties in Wisconsin.

States that could prevent the most annual losses per building by adopting modern codes

Rank
State
Total buildings analyzed
Total losses avoided
Losses avoided per building
1Wisconsin167$403,486$2,416
2Indiana9,574$16.3 million$1,704
3Arizona11,355$17.5 million$1,543
4Michigan1,825$2.5 million$1,391
5Illinois2,998$3.9 million$1,300
6Minnesota4,270$5.4 million$1,253
7Montana1,818$2.2 million$1,232
8North Dakota1,426$1.4 million$987
9Kansas3,024$2.7 million$886
10Iowa3,358$2.9 million$857
11Nebraska4,342$3.6 million$828
12Colorado3,691$2.4 million$639
Show All Rows

Source: ValuePenguin analysis of FEMA Building Codes Save study

Indiana ranks second, with more than $16.3 million in potential losses avoided each year — $1,704 per building. Meanwhile, Arizona — ranking third — could avoid over $17.5 million in potential yearly losses. That comes out to $1,543 per building.

Both states’ potential losses consist entirely of flood damages. Indiana’s flood risk may seem apparent — the Midwestern state has experienced several destructive floods in the past, with many occurring because the state sits on the Ohio Basin, which puts the surrounding communities at risk of river flooding. But although Arizona likely isn’t a state that comes to mind when one thinks of flooding, its flood risks stem from a staple feature of desert climates: monsoon season. During Arizona’s monsoon season, which runs from June 15 to Sept. 30, storms and flooding can hit quickly, causing conditions to change rapidly.

By disaster type, these states could prevent the most losses

Properties in the District of Columbia could prevent nearly $2,500 in flooding losses per building — that’s the most of any state affected by flooding. Its location (the nation’s capital is positioned between the Potomac and Anacostia rivers) and flatter elevation make it highly susceptible to flooding.

Of the 23 states included in wind damage models, Florida could prevent the most wind losses at $514 per building — this is due primarily to its risk of hurricanes. (Another ValuePenguin study on severe weather damages found that hurricanes were the leading cause of weather-related damages in the state, causing $4.8 billion in property damages over the past five years.)

States that could prevent the most annual losses per building by adopting modern hurricane wind codes

Rank
State
Annual losses avoided per building
1Florida$514
2South Carolina$163
3Alabama$87
4Mississippi$67
5Rhode Island$66
6North Carolina$39
7Massachusetts$35
8New Jersey$30
9Hawaii$29
10New York$19
11Connecticut$15
12Delaware$13
Show All Rows

Source: ValuePenguin analysis of FEMA Building Codes Save study. Note: Vermont was omitted because its per-building loss is $0 based on rounding.

Meanwhile, of the six states included in earthquake damage models, Hawaii could prevent the most seismic losses at $56 per building. Volcanoes are largely to blame for Hawaii’s earthquake activity, and of the thousands of earthquakes Hawaii experiences yearly, the majority occur on and around the Island of Hawaii. The southern districts of the island, where three of the state’s most active volcanoes are located, are the most impacted by earthquakes.

Following Hawaii, the states that could prevent the most seismic damage include:

  • California: $31 per building
  • Washington state: $21 per building
  • Utah: $13 per building
  • Oregon: $5 per building
  • Alaska: $4 per building

States that could prevent the least losses

Not all states would benefit greatly from updating their buildings to modern codes. Of all states, New Hampshire and Vermont are the two states where potential avoided losses are below $1 per building. New Hampshire would prevent the least overall, at 12 cents per building, with 78 cents per building in Vermont,.

States that could prevent the least annual losses by adopting modern building codes

Rank
State
Total buildings analyzed
Total losses avoided
Losses avoided per building
1New Hampshire73,204$9,09112 cents
2Vermont12,691$9,93178 cents
3West Virginia100,066$268,049$3
4Alaska42,787$230,622$5
5Georgia887,476$5.4 million$6

Source: ValuePenguin analysis of FEMA Building Codes Save study

In the case of New Hampshire, this is largely because the state has already adopted building codes that meet FEMA’s standards. New Hampshire is one of two New England states that have fully adopted the 2015 International Building Code and 2015 International Residential Code. But although Vermont has comparatively low resistance to hazards and hasn’t adopted the latest building codes, the risk of experiencing a natural disaster is low. FEMA classifies the average risk throughout Vermont at 5.7. Meanwhile, the national average risk across the U.S. is at 10.6.

Expert tips to prevent natural disaster damages

Amid a summer season of many weather-related property damages, the White House announced plans in early August to make more than $1 billion available to communities to help make them more resilient against extreme weather events. While that’s good news, you don’t have to wait until federal funds start rolling out. Homeowners can — and often should — take action to increase their own property’s resiliency now.

For those homeowners, Sangameshwar offers the following advice:

  • Checking if your home is up to code isn’t enough. "In many places, building codes are outdated and may not provide the protection you seek from natural disasters," Sangameshwar says. "Instead, the best thing you can do is talk to a local home inspector who specializes in peril. Your home insurance provider can help you find one. Once you get that report, explore making some — if not all — the recommended upgrades and changes where you can."
  • Insurance won’t cover the costs of any upgrades you make to your home, but it might give you a discount. Upgrades, including getting your home up to code or installing additional features to prevent losses from natural disasters, can often earn you a discount on your insurance premiums. Sangameshwar recommends checking with your provider to learn what discounts it offers.
  • If you’re in the market, determine a property’s risk before making an offer. While considering factors like price or even the number of bedrooms and bathrooms in the home is important, Sangameshwar notes that it’s equally important to know the property’s risk for disaster-related damages. In addition to utilizing online resources like the Federal Alliance for Safe Homes (FLASH), try reaching out to homeowners in the neighborhood to learn if weather events have impacted the area.
  • If you plan to buy a house in a high disaster risk area, don’t waive your inspection. "If a seller is asking you to waive one, there’s probably previous disaster damage or code violations they are trying to hide, so you should move on and find another option," Sangameshwar says. "If your seller agrees to a home inspection, ask your home inspector to verify that the home is up to code and see if they recommend any additional safety features that could make the home hazard resistant."
  • Check your property’s structure regularly. If your structure is outdated or damaged, ensure that you make all the relevant safety updates promptly. This is particularly true if you have a home in an area that’s becoming increasingly disaster-prone.

Methodology

To rank the states that could save the most in annual costs by updating buildings to modern codes, ValuePenguin researchers analyzed data from the 2020 FEMA study Building Codes Save. Our analysis included 18.2 million buildings constructed since 2000 across the U.S. Of these, 12.4 million were included in the three disaster models:

  • Flood damage
  • Hurricane wind damage
  • Seismic (earthquake) damage

Buildings that were excluded didn’t have sufficient data.

Specifically, researchers added the total losses avoided from adopting building codes established in 2015 or later and divided that number by the total number of buildings modeled. ValuePenguin researchers then ranked the states from highest to lowest based on this figure.

The losses avoided included physical damage to buildings. Other types of costs and savings (with the latter including reduced loss of income or insurance benefits) weren’t modeled.

Note: This study was updated Sept. 6 to fix the potential annual losses for commercial buildings, other residential buildings, other building types and industrial buildings.