State insurance director says calculations are still being made but ‘it is bleak’ as residents learn their insurance might not cover devastation to their homes

South Carolina’s state insurance director has warned of “horrendous losses” as he prepares to release the first official estimate of damage from this week’s deadly flooding that claimed at least 17 lives. And many residents are learning that their insurance may not even cover damage to their homes.

Ray Farmer said he expected the preliminary assessment, set to be released as early as Friday afternoon, to be more than $1bn.

South Carolina flood victims: No home, no power, no water but we have our lives Read more

“We’re still working on the calculations, but it is bleak,” Farmer told the Guardian.

“There is so much damage to infrastructure, and on top of that there’s significant damage to homes, automobiles and commercial interests. Many businesses haven’t reopened.

“Some sources have already estimated it in excess of $1bn. I can’t say exactly what it’s going to be, but the losses are horrendous,” he said.

University of South Carolina professor Jerry Wallulis is among those who fear they may be left to pay for the cost of damage out of pocket, despite having household insurance. His two-story home in Columbia’s Sherwood Forest neighbourhood was engulfed by a wave of water that flooded his sun room and much of the rest of the ground floor.

“We don’t live in a flood zone and like a whole lot of people had no realisation that we would ever be in danger of a flood,” he said.

“We don’t have a flood policy because we had no idea we would ever need one. There are so many questions: if you don’t live in a flood zone, are you even eligible to buy flood insurance? We don’t know how it all works, it’s very complicated.”

Insurance assessors were out in force on Thursday around Columbia, South Carolina’s capital that bore the brunt of last weekend’s record deluge. Farmer said the state had also partnered with insurance companies and the Federal Emergency Management Agency (Fema) to set up an “insurance village” in the centre of the city where residents could come to file claims or seek advice.

But large numbers of those affected were learning that their homeowners’ insurance policies were unlikely to pay for their wrecked homes. Farmer said that damage from rising water was excluded from most standard policies, and was covered only by a separate policy available from the federal National Flood Insurance Program that most had not purchased.

“Many folks who live in elevated areas saw no need to buy flood coverage and have been severely hit by flood damage,” he said.

Facebook Twitter Pinterest Alexis Ray paddles away from her mother’s flooded house as water that breached dams upstream continue to reach areas in the eastern part of the state on Thursday. Photograph: Joe Raedle/Getty Images

“It’s going to be horrendous. We don’t know the exact number yet but across a wide area home after home after home has been destroyed or adversely affected and people are not able to live in their residences. It might not be a big issue in other parts of the state but in Columbia, Charleston, Florence, Sumter, Myrtle Beach this has had a tremendous effect.”

Wallulis acknowledges he was luckier than neighbours farther down his road who were under water for several days, and appreciates that his home is still habitable. But with the water now gone he said he faced a new hazard, with fast-growing mold already spreading across his walls.

“We’ve contacted Fema and we’re waiting for an inspection but we don’t know what’s going to happen, or whether we will end up paying for everything. We’re going to have to replace the floors and possibly some walls.”

Russ Dubinsky, executive director of the South Carolina Insurance News Service, said a flood policy could cost as little as $200 in low-risk areas. “It’s sad and unfortunate in retrospect, a policy that costs relatively little could have protected against such a catastrophic event, but most people don’t buy flood insurance unless their lender says they have to have it,” he said.

“There might be a few thousand policies in and around Columbia but most don’t have it because they weren’t required to. This is going to affect a large number of people.”

President Obama’s declaration of a major disaster in several South Carolina counties on Monday opened the door to federal funds for homeowners and renters under Fema’s individual assistance program, by which those affected can get financial short-term help with rent or essential repairs not covered by insurance.

By late Thursday, Fema had already approved 402 applications for assistance with housing and other expenses totaling $1.44m, a figure expected to skyrocket in the coming days.

Longer-term rebuilding and repair work, however, is not covered by the federal program. Homeowners can apply for a low-interest loan from the US Small Business Administration to repair or replace their primary residence to a pre-disaster condition, but loans are capped at $200,000, plus $40,000 for personal property including automobiles, furniture, appliances and clothes.

Elsewhere in South Carolina, residents of Georgetown and other coastal areas were urged to evacuate on Thursday ahead of flooding expected from storm water flowing down swollen rivers toward the coast.

Nikki Haley, the South Carolina governor, said residents of Georgetown, Pawleys Island and Jamestown were in particular danger. “We are having an issue getting those people to leave because they have been in hurricane situations,” she said. “This is, as the general said, ‘a different kind of bad’.”

Haley said that flooding was expected in Georgetown by Thursday night, followed by Jamestown and Givens Ferry on Friday and over the weekend.

According to figures released by the city of Columbia on Thursday, search crews have checked almost 5,200 homes across Richland County since last weekend’s storms and evacuated more than 450 residents to shelters. Fewer than 350 remained in Red Cross shelters on Wednesday. Police also made two arrests for looting on Thursday.

Across the state, more than 200 roads remained closed on Thursday night.