WILMINGTON, N.C.—Forecasters and government officials warned that the hours and days after Hurricane Florence strikes the Carolinas are likely to be devastating due to the storm’s large size and slow speed, concerns that are magnified by the region’s coastal development in recent years and homeowners’ lack of adequate insurance.

Though Florence was downgraded to a Category 1 storm late Thursday as its wind speed slowed, that means the rain could linger for days, much like the rains of Hurricane Harvey in Texas last year that produced severe flooding.

Much of the growth in population and development in North and South Carolina has been in coastal areas. Yet fewer homeowners in the region own flood insurance than five years ago.

As of July 31, the latest figures available, the 134,306 policies in place in North Carolina from the National Flood Insurance Program represented a 3.6% decline from 2013. In South Carolina, flood policies were down 1.2%, to 204,342, according to an analysis of government data by The Wall Street Journal.

Standard homeowners’ insurance policies typically cover damage that can happen to a structure, but they exclude storm surges, other flooding and, in some coastal counties, wind damage. Homeowners must buy separate policies to get the excluded coverage. For flood policies, they typically buy from the U.S. government.

Consulting and actuarial firm Milliman Inc. estimates that fewer than 10% of the households likely to be affected by Florence in the Carolinas have federal flood insurance, based on the current storm footprint.

“Residents of these states are materially less prepared than they were in the past to deal with the financial consequences associated with major flooding events,” said Robert Hartwig, a risk-management and insurance professor at the University of South Carolina’s Darla Moore School of Business.

The widespread lack of flood insurance and low savings balances could force thousands of homeowners to seek federal disaster assistance in the form of grants and loans, he said. A year after Hurricane Harvey left many Texans in dire financial straits, tens of thousands of uninsured or underinsured residents continue to struggle to repair flooded houses.

For homeowners without insurance, the Federal Emergency Management Agency and federal government might provide only a fraction of what it will take to bounce back. “Suffice it to say that federal government assistance, especially when it comes to individuals, is not going to provide the necessary resources for people to get on the road to recovery,” said David Maurstad, chief executive of the National Flood Insurance Program.

Wind and Rain Expected rainfall of 10 inches or more through Sunday 50% or greater chance for hurricane force winds Potential storm surge through Sunday 6 ft. 3 ft. 1 ft. 9 ft. Populated places Florence’s path VIRGINIA NORTH CAROLINA TENNESSEE Winston-Salem Raleigh Charlotte Fayetteville Pee Dee River 2 p.m. Sunday Wilmington 2 p.m. Saturday Columbia 2 p.m. Friday 2 a.m. Friday 2 a.m. Saturday SOUTH CAROLINA GEORGIA Charleston Expected rainfall of 10 inches or more through Sunday 50% or greater chance for hurricane force winds Potential storm surge through Sunday 9 ft. 6 ft. 3 ft. 1 ft. Populated places Florence’s path VIRGINIA NORTH CAROLINA Winston-Salem Raleigh Charlotte Fayetteville Pee Dee River 2 p.m. Sunday Wilmington 2 p.m. Saturday Columbia 2 p.m. Friday 2 a.m. Friday 2 a.m. Saturday SOUTH CAROLINA GEORGIA Charleston Expected rainfall of 10 inches or more through Sunday 50% or greater chance for hurricane force winds Potential storm surge through Sunday 1 ft. 3 ft. 6 ft. 9 ft. Populated places Florence’s path VIRGINIA NORTH CAROLINA TENNESSEE Winston-Salem Raleigh Charlotte Fayetteville Pee Dee River 2 p.m. Sunday Wilmington 2 p.m. Saturday Columbia 2 p.m. Friday 2 a.m. Friday 2 a.m. Saturday SOUTH CAROLINA GEORGIA Charleston Expected rainfall of 10 inches or more through Sunday 50% or greater chance of hurricane winds Potential storm surge through Sunday 9 ft. 3 ft. 6 ft. 1 ft. Populated places VIRGINIA Florence’s path NORTH CAROLINA Raleigh Pee Dee River Charlotte Wilmington 2 p.m. Sat. 2 p.m. Sunday 2 p.m. Friday SOUTH CAROLINA Charleston GEORGIA

The Carolina coast began to feel tropical storm-strength winds on Thursday. The storm could make landfall in either North or South Carolina on Friday, the National Hurricane Center said.

“Please do not let your guard down,” FEMA Administrator Brock Long said at a news conference. “This is a very dangerous storm.”

The region’s ground already was saturated by rain prior to the storm. That means new rain will have nowhere to go, leading to more flooding that could send trees and power lines toppling.

On Thursday the storm already had cut power for thousands of residents. Duke Energy, a large utility serving the Carolinas, estimated that nearly 3 million of its customers could lose power. It serves 4 million in the region.

“This is a situation where it’s not days but possibly weeks to get the lights back on,” said Howard Fowler, Duke’s incident commander for Florence.

In the port town of Morehead City, N.C., Len Gibbs of insurance and real-estate firm Chalk & Gibbs Inc. said some customers have opted to forgo flood insurance because of the cost, which has been rising in recent years.

“We’ve seen people who’ve gotten their mortgages paid off, and even if they are in a high-risk flood zone, they haven’t experienced flooding in their neighborhood, so they say, ‘I’m not going to pay thousands of dollars for this insurance,’” he said.

As Hurricane Florence bears down on the U.S., here's what you need to know about the dangerous East Coast storm.

In one recent example, the owner of a large, elevated and expensive home in Ocean Isle Beach, N.C., faced a $9,071 annual flood-insurance premium. “They said, ‘We’ll roll the dice’” at that price, which was up from $5,600 in 2006.

While it is unlikely that living quarters of elevated beach homes would be flooded, dangerous surges could knock houses off their pilings, Mr. Gibbs said.

Some 3.6 million homes in Virginia, North Carolina and South Carolina lie in coastal areas and are worth more than $1 trillion in total, according to Zillow. That value is up nearly $150 billion over the last five years, as development and home prices have boomed.

North Carolina and South Carolina in particular have seen an influx of retirees and young families from the Northeast and California seeking more affordable homes. The median home value in Charleston, S.C., is almost $176,000—up nearly 32% from five years ago but still well below the national median value of $218,000, according to Zillow.

Related Video As Hurricane Florence hurtles toward the East Coast, we joined a team of U.S. Air Force Reserve Citizen Airmen as they fly into the storm to gather critical data. Photo: Rob Alcaraz/The Wall Street Journal

Most of the firms insuring these homes have excluded flood damage in their policies for at least 50 years, yet many homeowners learn they aren’t covered only after their property has been ravaged.

People with federally backed home mortgages are required to buy the additional flood coverage if they are in a designated high-risk area, but it is optional for everybody else.

Last year’s string of hurricanes—including Harvey, Irma and Maria—was a wake-up call to many people about the limitations of their policies. In the aftermath, policy ownership rose 3.6% in North Carolina and 2.8% in South Carolina.

Still, the buying spurt has been relatively muted and didn’t bring rates back to the 2013 level. Nationally, the number of policies has grown about 3% since last summer to 5.1 million across the 50 states, below the nearly 5.5 million policies held in September 2012.

In North Carolina, one of the 20 coastal counties appears much better prepared. Roughly 60% of estimated housing units in Dare County—part of the Outer Banks barrier islands—are covered by the government policies, according to the Journal’s analysis. In South Carolina, more than a third of housing units are covered in two of the eight coastal counties.

—Laura Kusisto and Jon Kamp contributed to this article.

Write to Leslie Scism at leslie.scism@wsj.com, Coulter Jones at Coulter.Jones@wsj.com and Valerie Bauerlein at valerie.bauerlein@wsj.com

Corrections & Amplifications

The value of coastal homes in Virginia, North Carolina and South Carolina has risen $150 billion over the last five years. An earlier version of this article said it was a $150 million increase. (Sept. 14)