PLUM ISLAND — For much of the island's history, its oceanfront was lined with small, cheaply built shacks. When storms washed them into the ocean — which has happened to dozens of cottages over the years — there was hardly anything of value to claim.

Those days are gone.

Now, the ring of hammering fills the air as shacks are leveled in favor of homes worth $1 million or more. With the push to build bigger and arguably better, a question lingers in the salty air: "When houses fall into the ocean, who is liable?"

It's a complicated question, which pits the federal government's policy of helping people rebuild oceanfront homes against the reality of beachfront erosion.

The island is included in the National Flood Insurance Plan, a program mandated by the federal government to insure property that private insurers consider too risky. Most of the island is categorized as a "high risk" zone, due to the potentially devastating effects of ocean storms, erosion and flooding. When a big storm comes and damages or wipes out homes, federally backed insurance will cover at least part of the costs.

But if the house falls victim to the ocean due to what the government defines as "anticipated cyclical levels" of erosion, it's not covered.

"Gradual erosion is not covered; however, damage caused by the collapse of land along the shore as a result of erosion of waves and current is," FEMA spokesman Bryan Hvinden said, noting the waves and current most likely have to be from a storm.

Information wasn't available on the amount of Plum Island erosion the government considers as "anticipated."

Right now, the area around the Beach Center is suffering severe erosion, but the patterns of erosion aren't consistent. For example, 40 years ago the beachfront near the Newbury/Newburyport line was eroding so badly that some cottages fell into the ocean and others were moved back. Today, more than 100 yards of dunes have "grown" there, providing a relatively safe barrier from the ocean.

"The beach also erodes in the winter and builds in the summer. If it weren't for storm events, we wouldn't have flooding," said Newbury Selectman Vincent Russo, a Plum Island property owner. "The insurance agency definition of erosion and flooding sounds like a loophole so they don't have to cover us."

Russo questions how the government can predict erosion to begin with.

"I can see if there was gradual erosion and I had to put a dock out from my house to get to the sidewalk, then a storm came and ruined the house then they wouldn't cover it," Russo said. "But they can't say the definition of erosion wavers to welsh a deal. I think the public needs to protect themselves."

No significant storms have hit Plum Island in recent months, but rough seas, easterly winds and high tides have taken their toll.

Tim Burn, a tenant of 6 Northern Blvd., has seen what the crash of waves has done to neighboring homes.

During the last high tide on the island, he watched cautiously as the water levels rose.

His neighbor's deck sits torn apart, a hint of what greater damage has been done to other homes on the shore over the years.

Recently the deck of Jeanne's Restaurant was ordered to be removed as the beach eroded beneath it and threatened to sweep the deck into the sea.

Who gets insured?

The government's flood insurance plan has limits — it doesn't freely give away money to homeowners.

In a low-risk zone, $250,000 worth of flood coverage plus $100,000 in content coverage costs just $317 a year. On Plum Island, islanders can pay up to $1,200 premium as their properties are high risk.

"There is a common misperception that the government will step in and pay for the damage," Jackie Page of Arthur Page Insurance on State Street said.

The national plan guarantees to pay up to $250,000 for private homes and $500,000 for commercial buildings in a flood zone. In addition to the national flood insurance plans, private agencies offer excess flood insurance more appropriate for multi-million-dollar homes.

But while mortgage lenders require homeowners to have flood insurance when they are on the water, those who pay off their mortgage and fully own their home are not required to have any coverage at all, according to FEMA.

"The cost all depends on where your home is, elevation, number of floors and when it was built," Page said.

Greatly factored in is elevation, a hotly debated topic as island newcomers built up homes on the waterfront.

For a home built after Feb. 15, 1978 in the Newburyport section of Plum Island or has undergone a more than 50 percent renovation, residents must have an elevation certificate in their possession in order to receive an insurance quote. The same holds true for the Newbury side for homes built after March 15, 1977.

"It's very important to remember it is really a partnership between the homeowner and the state and local government to protect the resident," Hvinden said. "Most important, that property is insured to level allowed and the local building codes are properly enforced."

Hvinden says a major part of having flood insurance work is adhering to guidelines to lessen risk.

"The greater the risk, the higher the premium," Hviden said. "There will be a higher premium in a coastal area than on a hill or away from the water. A key part of that is ensuring the local jurisdictions are adhering and homeowners themselves are as well. "

"If there is a problem on Plum Island, I would warn people not to contact their insurance company but go through an outside agent who can answer these questions," Russo said. "This is all going to come to pass, and we are at the mercy of the insurance companies who play games around the world every day."