BAY HEAD, N.J./BOSTON – The people of the Jersey Shore may feel alone in the world right now, their homes destroyed and their beaches ruined by Hurricane Sandy. But they will soon face a decision familiar to others who have survived massive storms – do I rebuild?

There is a reason New Jersey Governor Chris Christie called the destruction Sandy wrought on the shoreline “unthinkable.” The one-time vacation paradise, familiar to fans of Bruce Springsteen, is now a twisted wreck, with remnants of a roller coaster floating in the ocean, and houses erased like they were temporary markings.

“That’s our resort, that’s our Caribbean island, it’s everything to us,” said Rosemarie DiPisa, a New Jersey realtor who has a home on the barrier island community of Lavallette – at least, she did. With no physical access to the island, she won’t know for at least two weeks if her house is still there.

In the days and weeks to come, there will inevitably be a debate about whether there is any point in trying to reconstruct what was lost, the same as in New Orleans’ Lower Ninth Ward after Katrina or in parts of Miami after Andrew.

The cost of rebuilding quickly can be astronomical, especially as people compete for limited resources, with building equipment in short supply and a dearth of contractors.

Insurance is unlikely to cover the full cost of rebuilding and replacing damaged belongings, let alone other costs like renting another home to live in for a long period of time.

It would be one thing if there was a quick path to recovering that investment, but history shows there is not. After Hurricane Camille struck the Gulf Coast of Mississippi in 1969, it took a generation for homes in the area to appreciate enough to recoup reconstruction costs.

Just don’t tell that to Jersey Shore locals.

“I’ve lived here all my life. I have a loyalty to this town. You can rebuild houses. You can’t rebuild lives,” said Robert Berentes, a 22-year-old photo clerk, while waiting for gas.

Berentes is certainly not alone. The ocean breeze seems to get into people’s bones, drawing them back to the shore year after year. DiPisa said the market for million-dollar luxury homes was booming on the shore before Sandy.

But determination to rebuild is one thing and capital is another. How wiped-out homeowners and business proprietors will pay for repairs is still very much uncertain.

COSTS COMPOUND

Marie O’Neill was told her insurance will not cover the destroyed contents of Mueller Bakery in Bay Head, New Jersey, the business she has owned since 2003, only the building itself.

“We are completely destroyed,” O’Neill sobbed as she stood on sand-covered Bridge Ave., the town’s main street. “Everything has a layer of sand and mud. Our freezer and oven and mixers are all destroyed.”

And yet O’Neill and her husband plan to rebuild the business, even at an estimated cost of up to $600,000.

One of the companies used by insurers to project disaster losses said on Thursday Sandy may end up causing $20 billion in insured losses and $50 billion in economic damage, making it one of the costliest disasters in the U.S. ever.

Insurers say they have already started writing checks, though it will take years to settle some claims.

One of the problems is that homeowners may have to litigate with their insurers over what destroyed their homes. As absurd as it may sound, the “wind versus water” debate is one of the most important in the insurance industry.

Wind damage is covered by homeowners’ insurance policies, while flood damage is covered by the federal government’s National Flood Insurance Program, assuming the homeowner bothered to take out a policy.

But when a home is wiped off the face of the earth in a storm like Sandy, how do you prove which one caused the damage, and who pays? It is an issue that has been litigated for years in Louisiana, and now the courts in New York and New Jersey may have to litigate it all over again.

“A hurricane is not just wind. That’s called a tornado,” said Gary Thompson, a partner and insurance recovery attorney at Reed Smith in Washington.

Thompson and peers warned this week the disputes over Sandy will carry on for years, leaving many people to spend their own money first and hope for recovery later.

REBUILDING NIGHTMARE

There are few people who know more about the “rebuild or not?” decision than Marc Roy, who was chief of staff for the Federal Emergency Management Agency in Louisiana in 2006 and 2007, in the aftermath of Hurricanes Katrina and Rita.

To hear him tell it, the decision will not take long.

“I think it’s been proven throughout the last 100 years that people are going to live where they are most comfortable, and rebuilding in metropolitan areas is, I think, a given from now on,” said Roy, now a professor at Tulane School of Law and affiliate of Tulane’s Disaster Resilience Leadership Academy.

In the early days after a disaster, people tend to rebuild to the standards that existed before the storm, rather than to more-modern standards designed to make buildings stronger, he said.

That changes over time as insurance companies begin to insist on improved building standards as a condition of coverage. But it will also take recognition among policymakers that it’s worth the money to rebuild better.

“For everyone who leaves we’ll probably see someone come in,” Roy said. “Disasters bring new suffering but they also bring new opportunities.”

There are plenty of precedents for rebuilding destroyed communities. In 1992, Hurricane Andrew devastated parts of the greater Miami-Dade area. Until Katrina (and now Sandy), Andrew was the American benchmark for the power of a natural disaster.

And yet Homestead, Florida, which Andrew more or less erased from the map, rebuilt. Twenty years after the storm, Homestead’s population is nearly two-thirds larger than it was when Andrew ruined the town.

The only problem with rebuilding is if a storm like Andrew hits all over again, said Karen Clark, one of the pioneers of scientific modeling of natural disasters.

“We don’t do ourselves any favors by talking about storms of the century … making it sound to the laypeople like this is totally unpredictable and will never happen again,” she said.

In the end, the decision to rebuild will not be an economic one for most people – emotion will overrule most practicalities.

“If you’re afraid of water, you don’t live in this town,” said Irene Conti, 67, who was cleaning out the garage of her rental property in Bay Head, which was inundated with four feet of water. “It’s a beautiful town, a beautiful lifestyle.”

(Reporting by Dave Warner and Ben Berkowitz; Editing by Tiffany Wu and Todd Eastham)