Contrary to popular belief, flood insurance is something every property owner should consider. While FEMA’s flood maps identify 8.7 million US properties as located in Special Flood Hazard Areas, the nonprofit research organization the First Street Foundation used current climate data, precipitation maps and other risk factors to determine that in actuality roughly 14.6 million properties were at “substantial” risk to the peril of flood. Floods can and do happen anywhere and with changing environmental factors, that risk is only expected to grow.
So, what can unsuspecting property owners do to protect their investments? Talking to an expert about the property’s actual flood risk and engaging with an agent or broker who knows their way around the flood insurance market is a great way to start.
Although property owners are often offered the one-size-fits-all a policy through the federal government’s National Flood Insurance Program (NFIP), it is not a property owner’s only option. In fact, flood insurance buyers can purchase more comprehensive coverage with higher limits and often at lower rates through the private flood insurance market. Those looking to buy flood insurance to satisfy a federally insured mortgage lender, have the comfort of knowing that private market flood insurance is universally accepted.
In completing their own due diligence, or in working with a knowledgeable agent or broker, most consumers will find a policy from the private market to be superior to an NFIP policy in several ways. For example, consulting firm Milliman found after studying single family home premiums in Florida, Louisiana and Texas, that a majority of homeowners see lower premiums with a private flood policy over an NFIP policy. And it’s not just the rate that property owners could find more appealing. Unlike the NFIP, certain private flood insurance policies will allow limits of up to $5 million, while the NFIP cuts out at $250,000 for residential property and $500,000 for commercial property. Further, a superior private flood insurance policy will offer the following options not included in NFIP policies, coverage for basement contents, coverage for additional living expenses after a claim, and a waiting period of as little as 15-days rather than NFIP’s standard 30-day waiting period.
Should the worst happen, private flood insurance policyholders also have the benefit of using any qualified claims adjuster after a major storm, while NFIP policyholders are often stuck waiting for an NFIP-certified adjuster show up. With more adjusters available, private market adjusters can be on the scene immediately and get claim checks into the hands of policyholders more quickly. Importantly, private flood insurance policies allow consumers to get help from their state department of insurance or state court system in the event of a dispute whereas the only third party option available to NFIP policy holders is the federal court system which is far more cumbersome, time consuming and expensive.
In summary, when your client needs flood insurance, always give them the private market option. Savvy flood insurance producers understand that offering better coverage at better prices yields better outcomes for clients, producers and in this case taxpayers who have lost billions because of NFIP ineptitude.
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