The flood insurance market has been constantly changing for a couple of years. We've seen this happen for federal flood insurance and even for flood insurance availability.

One of the biggest changes came in form of allowing private flood insurance for property owners who have an FHA loan, USDA, or even VA loan. In this article, let's talk about how the private flood insurance market is changing the whole flood industry.

How Private Flood Is Changing the Flood Industry

Coverages

When it comes to understanding how the private flood is changing flood insurance coverage, we first need to get a basis or some form of comparison to the National Flood Insurance Program (NFIP).

So, let's just mention here that when it comes to federal flood insurance, you only get a maximum of $250,000 in building coverage and $100,000 in contents coverage or personal property coverage for residential flood policies. This coverage amount can go up to $500,000 if you're doing a commercial flood policy.

Now that we've established this, it's important to highlight that private flood insurance companies don't have these coverage limits. You can definitely still get more than $250,000. Even when it comes to personal items or content coverage, you can definitely go more than $100,000 for flood damage. That coverage also comes with the loss of use, additional living expenses, and/or replacement costs.

Flood Insurance Guru - Flood Risk Verification Tool

Pricing

When it comes to pricing, private flood insurance also offers more flexibility and is generally cheaper. This is especially true if we look at how the National Flood Insurance Program (NFIP) Risk Rating 2.0's impacts which will cause around 77% of the properties to get an increase in premium rates.

To know more about private flood insurance pricing, watch the video below to know more:

Claims Payout and Wait Period

Now, let's jump into what may be the most crucial parts of your flood insurance policy: claims and wait periods.

When it comes to wait periods, private insurers generally have a quicker turnaround time for your policy to take effect on your property. Most private flood insurance policies can be available and take effect on your property within a maximum of 15 days.

This is relatively shorter than federal flood insurance with a strict 30-day period. This can be helpful since you immediately get coverage and flood protection on your property quicker.

This type of faster wait time is also applicable for a claims payout. When filing for a flood insurance claim with private insurers, you may get the payout on your private policy within a maximum of 60 days. Now, it's important to note here that this generally depends on private carriers, so your flood claim may be available at an earlier time.

Payment Options

Payment options with private flood are almost similar to the National Flood Insurance Program (NFIP). So you can pay this out of your pocket or through your mortgage bank. When we say that you pay out of your pocket, this means that you pay for the whole premium via cash or using your own funds.

This is drastically different from mortgage payments since carriers would generally bill your bank for your flood insurance. What is important to note here is that there will be more mortgage payment options moving forward as the private flood is now available even for FHA, USDA, or VA loans.

Additionally, some private flood carriers may offer quarterly payments. This may provide more flexibility in paying your flood premiums, but there will be no delay in your flood protection and coverage. This can really be beneficial for premiums that are relatively high. Although banks may not be able to push through with this, paying $2,000 quarterly is way easier than paying it whole upfront.

It's also important to mention here about payment grace periods which, depending on your carrier, may have a 29-day grace period, 7-day, or even no grace period at all for payments to be made.

Want to know more about the difference between NFIP & Private flood in 2023?
Watch this video below to get started:

CHANGING FLOOD MARKET

So this is how the private flood is adapting to the constant changes in the flood insurance market. It's important to keep in mind that this generally doesn't guarantee that it's the best option for your needs. Sometimes, private flood may not be available because most of its assessment isn't based on flood zones alone.

If you want an in-depth understanding of private flood insurance, make sure click below to access our Private Flood Insurance Course:

Flood Insurance Guru | Private Flood Course

We will have to wait and see if federal flood insurance will also follow the path that private flood insurance is taking or one-up it by doing more to fight flood risks and provide more substantial flood protection for residents across the United States.

If you want to start your flood insurance, follow these three simple steps:

  • Fill out this form — Get A Quote
  • Talk with our flood education specialist.
  • Get back to the important things in your life.

If you have additional questions that are related to flooding and flood insurance, make sure to visit our Flood Learning Center where we try to answer all your questions. Click below to start your flood learning with us!

Flood Insurance Guru - Flood Learning Center

When it comes to coverage on flood damage, it's important to know what insurance policy can provide this for you. Sometimes, you may receive a flood coverage rejection letter. Now, you might be wondering what is this document and why is it important.

In this article, we talk about this flood coverage reject letter, your flood insurance coverage, and how knowing this can really help your property be saved from flood loss.

What is a Flood Coverage Rejection Letter?

Understanding Insurance Coverages

In order to understand this letter, first we need to go back to the coverage process and terms when it comes to other insurance policy types.

This is the best time to really mention that when it comes to homeowner's insurance policy, you don't really have coverage for flood damage built-in or included with your standard homeowner's insurance. Most of the protection that this insurance will provide will be for water damage, disaster damage like tornadoes, fires, earthquakes, and sometimes even mold damage. However, this does not really cover damages or losses from flooding. What is a Flood Coverage Rejection Letter?

You also have auto insurance on this topic, but the coverage with this policy is only for your vehicular damages. This can be through natural causes like disasters that we mentioned or accidents.

But one thing that you may get from your insurance agent for both of these policies is the flood coverage rejection letter.

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What is Flood Coverage Rejection Letter?

This letter is a document that you are expected to sign to acknowledge that when it comes to your homeowner's or auto insurance policies, you are aware that you won't get coverage for the damages due to flooding from these policies.

The purpose of a flood coverage rejection letter is to really get your confirmation that you are aware that you won't get any flood insurance coverage from these policies.

Sometimes, your agent might send you this letter and if you sign it, you directly reject or decline the flood coverage offered by them. Now, this is important because when a flood loss happens, you may not file for a flood claim since you already signed the rejection letter.

Basically, signing this letter simply means that you agree to not get coverage for flooding.

What If You Didn't Get One?

On the other hand, if you didn't get a flood coverage rejection letter from your insurance carrier for your property or vehicle, then that simply means that they didn't offer any coverage.

Generally, you might need to get a separate flood insurance policy if you want to be covered for flood damages. So, you might be wondering, what are your flood insurance options?

A standard flood insurance policy with the National Flood Insurance Program (NFIP) can provide you coverage for a maximum of $250,000 for building coverage and a maximum of $100,000 for content or personal property coverage for flood losses. This is especially true if you have a policy with the NFIP and even with its recent Risk Rating 2.0 update.

What is a Flood Coverage Rejection Letter?

On the other hand, private flood insurance is where you can find more flexibility as their standard flood policy coverage doesn't really have limits. You can generally go way above that $250,000 and $100,000 coverage with federal flood insurance.

To learn more about the NFIP and Private Flood insurance, WATCH the video below:

Get Flood Insurance

Nowadays, flood insurance is a must because flood damage can happen anywhere. As we always say, all properties should have coverage from flooding since floods can happen anywhere even in places that aren't considered high-risk areas for flooding.

Flood Insurance Guru - Flood Risk Verification Tool

Getting the right flood coverage with your home can really help you reduce the impacts of flood risk and bounce back from a natural disaster like this.

So if you have additional questions that are related to flooding and flood insurance, make sure to visit our Flood Learning Center where we try to answer all your questions. Click below to start your flood learning with us!

Flood Insurance Guru - Flood Learning Center

Let's start simplifying your flood insurance. You only need to follow our three easy steps:

  • Fill out this form — Get A Quote
  • Talk with our flood education specialist.
  • Get back to the important things in your life.

One of the biggest things that a lot of property owners might be worried about flood insurance is the mandatory purchase requirement. But, in some cases, you can actually fight this.

In this blog, we talk about how flood insurance can be canceled after getting your flood zone changed.

Changing Your Flood Zone

When it comes to flood insurance, it's important that you also are aware of the flood zone designation, especially for your property. One of the key things to remember is that flood zones are not permanent and they can change over time.

Let's just say you have a property that's mapped into a low-risk flood zone like flood zone X, this doesn't mean that that building will stay in that zone forever. This is especially true as flooding impacts how flood insurance rate maps (FIRM) work.

How to Cancel a Flood Insurance Policy After a Flood Zone Change?

Sometimes, when a flood insurance rate map update comes to your community, this could mean that you might see your property get moved into a high-risk area like flood zone A or flood zone AE. Having your property or building mapped into a high-risk flood area generally results in a mandatory purchase of flood insurance.

To see your revisions to your community's flood maps, you can CLICK HERE to visit the official website for FEMA flood insurance rate map (FIRM) changes.

How FHA Accepting Private Flood Impacts Coverage RequirementsHow to Cancel a Flood Insurance Policy After a Flood Zone Change?

This requirement might come from your mortgage lender or the state law itself such as the Federal Emergency Management Agency's (FEMA) standards. But, what if you know that your property shouldn't be in a high-risk flood zone? How do you fight these changes?

This is where what's called a Letter Of Map Amendment (LOMA) comes in to save the day.

Letter Of Map Amendment

A Letter of Map Amendment (LOMA) is an official document that's issued by FEMA to process the change of a flood zone designation for a property. A LOMA is achieved after a successful application for a Letter of Map Change (LOMC) thru FEMA's official website.

Flood Insurance Guru - Flood Risk Verification Tool

It helps to have the necessary information and documents when applying for a LOMA. One of the helpful supporting documents you can provide is an elevation certification. Although elevation certificates are no longer required — especially with the recent update to the National Flood Insurance Program (NFIP) and Risk Rating 2.0 — this can really help a lot in proving the validity of your request to be mapped out of a high-risk area.

An elevation certificate will show a more accurate representation of your property such as its risks from flood water, base flood elevation, its exact distance from your lowest habitational floor, and other relevant information.

Get Elevation Certificate

Once you get a LOMA secured for your property and have your property removed from the Special Flood Hazard Area (SFHA), that's the time when the mandatory flood insurance purchase will also be removed.

Canceling Flood Insurance

The next step is to inform your flood insurance carrier or provider that you are intending to cancel your flood insurance. Again, it's important to note that being moved out of a high-risk flood zone will automatically cancel your flood insurance.

In order to cancel your flood policy, you must send a signed cancelation letter to your flood insurance carrier. Regardless if you have a private flood insurance policy or federal flood insurance, you must show them this document to certify that you are intending to cancel your flood policy.

After this, you also need to inform your bank about the cancelation by sending them the same signed cancelation letter so they would no longer enforce the flood insurance purchase requirement on your property.

How to Cancel a Flood Insurance Policy After a Flood Zone Change?

This is important as both the flood insurance company and your bank are the ones determining the flood insurance requirement for the property. Additionally, you may also send them the Letter of Map Amendment (LOMA) that you were able to get to show them that your flood zone has been changed.

Flood Risks Now

Removing the flood insurance requirement with your property may really help in saving some money from flood insurance premiums however it's really important to remember why a purchase of flood insurance can help you long-term.

When it comes to actual flood risks, the reality is that even low-risk flood zones can be flooded too. This also means a Letter of Map Amendment (LOMA) won't guarantee that your home no longer has flood risks.

This is why we still encourage property owners to get flood insurance coverage for their property. A single flood policy will be able to provide building and contents coverage, so both the structure and your personal property inside it will have flood protection.

If you have questions regarding flood zones, flood insurance, or anything flood-related, click below to access our Flood Learning Center to get your answers.

Flood Insurance Guru - Flood Learning Center

Ready to start simplifying your flood insurance? Just follow these three simple steps:

  • Fill out this form — Get A Quote
  • Talk with our flood education specialist.
  • Get back to the important things in your life.

One of the biggest things that really impact flood insurance is flood zones. Aside from being a form of measurement of how the property is going to flood, this is also a big consideration when it comes to flood insurance.

 What is Flood Zone AE and 4 Things To Know

In this blog, we want to talk about one of the most common flood zones you'll see in flood insurance rate maps (FIRMs), the flood zone AE and discuss the 4 things you need to know about this zone.

Flood Zones

Flooding is one of the biggest and most common natural disasters that occur in the United States. It's estimated that even just an inch of water can cause around $25,000 in property damage.

One of the key things that can tell your risk of flooding and your property's chance of flooding is its flood zone. Historically, with the National Flood Insurance Program (NFIP), these flood zones are one of the bases for assessing your flood insurance premiums.

However, since we moved into a new Risk Rating 2.0 program, flood zones became more of a regulatory measurement. This simply means that flood zones are only used now to see whether or not you're required to carry a flood policy with your property.

What is Flood Zone AE and 4 Things To Know

Flood zone AE is one of the common high-risk flood zones in the United States. In order to understand this high-risk zone, we will give you four things that you need to know by answering the following questions:

  • Is Flood Zone AE in the 100-Year Floodplain?
  • Is flood zone AE in a special flood hazard area (SFHA)?
  • Is flood insurance required in Flood Zone AE?
  • How does Flood Zone AE impact flood insurance rates?

So, let's answer these questions, but first, let's determine...

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What is Flood Zone AE?

Flood zone AE is also known as a special flood hazard area since this is generally a zone where flood risks are very high and flooding can happen once every 100 years. Flood zone AE also has its base flood elevation determined through flood maps. 

This is why it's commonly known as well as the 100-year flood zone. This is strictly based on research on probability however this doesn't really reflect how disasters work so it still differs. The flood zone is also known to have a 1% chance of flooding per year.

What is Flood Zone AE and 4 Things To Know

 

Is Flood Zone AE in the 100-Year Floodplain?

Being in the 100-year flood area or floodplain, Flood Zone AE presents around a 26% chance of flooding during a 30-year mortgage. This generally entails the risk for flooding on the property during that period. Generally, you will see properties in flood zone AE are close to a body of water.

 

Is Flood Zone AE in SFHA?

With the previous item answered, this easily puts Flood Zone AE in the special flood hazard areas (SFHA).

Special Flood Hazard Areas (SFHA) generally are areas that can experience a different type of floods. The Federal Emergency Management Agency (FEMA) would also qualify a flood zone designation as being in the SFHA if it experiences special floods, mudflows, or floods that are due to erosion hazards.

Is Flood Insurance Required?

Due to the flood zone being a high-risk area, properties that are mapped into flood zone AE are generally required to carry flood insurance.

This means that if your home or commercial building is sitting on flood zone AE, your mortgage will require you to get flood coverage for the property against flood damage. This is to make sure that the property's value, structure, and integrity is protected and preserved in the event of a flood disaster.

What is Flood Zone AE and 4 Things To Know

These zones are determined by the flood insurance rate map (FIRM) to see if the structures of the properties can keep up with the possible flood risk in the area. It's important that the flood map uses the data on the chance of flooding in the area, the base flood elevation of the community or the property, and as mentioned before the probability of a flood in the event that there's heavy rainfall or somewhere along those lines.

So, when it comes to Flood Zone AE, you can expect that a mandatory flood insurance purchase will be expected for property owners who are mapped into this high-risk flood area. This may come either from your mortgage lender or through FEMA itself.

 

Flood Zone AE & Premium Rates

To answer the question: How does flood zone AE impact flood insurance rates, we will have to look at both the past and the current state of the flood insurance industry.

Traditionally, with the NFIP and FEMA, being in a flood zone AE has a direct impact to flood insurance costs. This is because, historically, federal flood insurance would use flood zones as a basis for flood insurance premiums which means that generally, some properties with minimal flood hazard will see cheaper flood insurance rates compared to flood zone AE.

Flood Insurance Guru - Flood Risk Verification Tool

However, things have changed with NFIP's Risk Rating 2.0 which only uses these zones as a measurement of whether or not a property should have flood insurance. So, flood zones no longer have an impact on rates. The same can be said for the private flood insurance market.

It's important to remember, however, that there are other things that your flood insurance policy costs will be based on such as distance to water, type of flood, frequency of flooding, the elevation of the property, and many more.

What is Flood Zone AE and 4 Things To Know

So, those are the four things you should know about flood zone AE in the current flood insurance market. If you have questions regarding flood zones, flood insurance, or anything flood-related, click below to access our Flood Learning Center to get your answers.

Flood Insurance Guru - Flood Learning Center

Ready to start simplifying your flood insurance? Just follow these three simple steps:

  • Fill out this form — Get A Quote
  • Talk with our flood education specialist.
  • Get back to the important things in your life.

The flood insurance industry is now changing more than ever. These changes are really to lock down on ensuring that your flood risks are well covered so that you won't get lopsided by a flood event.

What is Parametric Flood Insurance?

Some of the changes we've seen in recent years are how the National Flood Insurance Program (NFIP) updated to Risk Rating 2.0 and another would be the availability of private flood insurance for FHA loans.

In this blog, we will talk about parametric insurance for flood policies and how it could impact the flood industry as a whole.

What is Parametric Flood Insurance

Parametric insurance in general is a form of coverage wherein the policyholder will be rated on the overall impact or severity upon an occurrence of the event. This is drastically different from simply basing it on the impacts or losses to the insured.

In the case of a natural disaster like earthquakes, wildfires, or floods, this means that the coverage that will be provided will be based on the actual impact of that disaster on your property.

For flood insurance, this could mean that you will be covered based on the general impact of the flooding instead of simply how much flood damage your property occurred. Generally, parametric flood insurance also kicks in as the flood event is hitting you instead of having the insurance coverage kicking in after assessing the damage to the insured building.

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This real-time analysis is done by using technologies from satellites and other data that detect things like the level of water impacting the installed device on the property. This allows the insurance companies to also provide the necessary claims as soon as possible since the assessment is being done during the flood event and not simply after.

To set an example, FloodFlash — led by Mark Hara — one of the leading parametric flood insurance that's recently adding the United States to the areas where they are looking to provide coverage, mentioned that they use a specific tool that immediately notifies them whenever a policyholder gets flooded.

What is Parametric Flood Insurance?

So, you might be wondering, how is this different from the standard flood insurance policy that you can get through the NFIP or private flood insurance?

Difference Between Parametric and Standard Flood Insurance

When it comes to what sets parametric flood insurance from standard flood insurance policies, we will look into its coverage, claims payout, and overall timeframe for your policy to kick in. So, let's discuss each of these.

Coverage

A standard flood insurance policy can provide you coverage for a maximum of $250,000 for building coverage and a maximum of $100,000 for content or personal property coverage for flood losses. This is especially true if you have a policy with the NFIP and even with its recent Risk Rating 2.0 update.

On the other hand, private flood insurance is where you can find more flexibility as their standard flood policy coverage doesn't really have limits. You can generally go way above that $250,000 and $100,000 coverage with federal flood insurance. 

So, how is parametric flood insurance different?

Well, since your flood insurance claim will be paid out through cash or generally directly to your bank, you can get more than what a standard flood policy offers. This means that even additional living expenses or business loss of use will be part of that coverage.

These coverages are something that traditional insurance doesn't generally include especially for federal flood insurance. Hence, parametric flood insurance can really fill in for that coverage gap that standard flood coverage generally misses. This is no surprise as it is, after all, one of the goals of parametric insurance.

What is Parametric Flood Insurance?

It's important to note, however, that parametric insurance policies are based on a pre-agreed sum of money when it comes to coverage. This means that if you agreed to get only $250,000 for coverage with your parametric flood insurance policy, that is the only amount you will be getting.

Claims Payout & Turnaround Time

Now, when it comes to claims payout, parametric flood insurance also has its fair share of beneficial factors because of how the system works.

You see, once your insurer detects that the water levels hit that certain spot — generally about 8 inches of water — the insurers' system immediately gets notified about this as if it's saying "Hey! This property is legit getting flooded right now".

What is Parametric Flood Insurance?

Generally, this means faster turnaround time and assessment. Since parametric flood insurance basically has the amount of coverage ready to fight against flood damage and the data confirms the flooding, flood claims may be paid out as soon as 24-48 hours.

Again, since most companies who provide parametric flood insurance tend to provide coverage through cash, this means that you get the payout immediately or the coverage is generally transferred to your bank.

RELATED: 3 Things that Must Happen for Flood Claim to Pay Out

On the other hand, a standard flood policy will generally pay out in less than 90 days. This is because there's a process such as assessing the damage, filing the flood insurance claim, and waiting for the claims payout.

Although this timeframe generally depends on your insurance provider, it can still take days (if not weeks) for a flood policy to pay out with traditional flood insurance.

Why Parametric Flood Insurance is Good

Now that we've covered what parametric flood insurance can do, it's easy to see why this could really help homeowners and business owners in the United States.

Since it fills in the potential gaps in standard flood insurance and has a relatively quick turnaround time for payouts, this can really improve our resilience to the risk of flooding.

Flood Insurance Guru - Flood Risk Verification Tool

Considering how the impacts of climate change and the behavior of water are drastically changing for the worse especially in recent years, having this type of insurance protection will really help more people find security and certainty.

Moreover, adding this option in the flood insurance sector may also increase property owners' motivation to get flood insurance for their property.

Got more questions on flood insurance or parametric flood policies? Is there a flood question that you need answered? Click below to go to our Flood Learning Center where we try to answer all your flood-related questions.

Flood Insurance Guru - Flood Learning Center

Ready to start simplifying your flood insurance? Just follow these three simple steps:

  • Fill out this form —Get A Quote 
  • Talk with our flood education specialist.
  • Get back to the important things in your life.

The flood insurance market is progressively changing as we move into another year. Although a flood policy is a separate insurance policy from your homeowner's insurance, this can still have a lot of impact on your buying power with your home.

Flood Insurance and Your Home's Buying Power

In this blog, let's talk about how the recent changes in the flood insurance market can positively affect your buying power and what you can do to really improve this and make the most out of your flood insurance policy.

Want to listen while reading? Just play our podcast for this blog below:

 

 

Buying a Home & Purchase of Flood Insurance

First, let's talk about my experience in buying a home and flood insurance.

About 10 years ago, sometime in 2012, I was buying a new property to call our new home. However, this new house is in a flood zone and I only had two weeks before closing.

Considering this, the insurance agent told me that my flood insurance premium rates can go up to $3,000. This became a hurdle to us in getting this house. Even if I did, I'm going to pay an additional $250 per month for the house which is a lot of money.

Flood Insurance and Your Home's Buying Power

But I knew that this wasn't particularly right since there were updates to flood maps in the area, the house was in compliance, and the policy can be grandfathered. This helped me turn that $3,000 cost of flood insurance premium into around $300. 

 

Impacts to Buying Power

Generally, this type of situation can also impact your buying power for your home. If you have a federally-backed loan, you can only go through federal flood insurance which can mean that you might get higher flood insurance rates.

It would really be difficult to close a deal when one of the catches is that the new homeowner will have to pay more because of flood insurance rates. This can easily discourage people from buying your house and hurt those who are selling theirs.

Flood Insurance and Your Home's Buying Power

However, this may change in a couple of weeks due to a huge paradigm shift in flood insurance options.

 

What is Changing with Flood Insurance

Although a lot of these things went away with the recent update of the National Flood Insurance Program (NFIP) and Risk Rating 2.0 such as no longer basing flood insurance rates on flood zones and grandfathering flood policies, flood insurance costs can still have a lot of impact on your buying power.

This is where the upcoming update comes into a beneficial play for property owners who have a Federal Housing Administration (FHA), Veteran's Association (VA), or United States Department of Agriculture (USDA) loans.

The Department of Housing and Urban Development (HUD) proposed that homeowners with an FHA, VA, or USDA loan should have the option to get flood insurance from private insurers as well. This drastically changes consumer choice within NFIP-participating communities as people will have more options to go to protect themselves from flood damage.

Simply put, even if you have an FHA loan, you can get private flood insurance starting December 21st, 2022.

Related: FHA Accepting Private Flood Insurance

Buying Power and Flood Policies

So, how does this impact your buying power?

Let's look at this before this proposal happened. if you have a flood policy with the Federal Emergency Management Agency (FEMA) because that's the only one accepted when you have an FHA loan, your buying power is negatively getting impacted by this. Potential buyers will have to face higher flood premiums which can add up to their monthly payment.

Flood Insurance and Your Home's Buying Power

Additionally, the National Flood Insurance Program has certain coverage limits when it comes to their flood policies. This is where that maximum of $250,000 for building coverage and $100,000 on personal property coverage kicks in. For some buyers, this may not be the best fit for their budget and needs when it comes to flood insurance.

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Again, this can easily discourage potential buyers especially if there are similar homes that have cheaper flood insurance costs because they have a private flood insurance policy.

So, this new proposal of allowing homeowners with an FHA loan to get flood insurance from private insurers not only help expand the options of property owners but also increase their buying power.

 

Flood Insurance

Nowadays, flood insurance is a must because flood damage can happen anywhere. As we always say, all properties should have coverage from flooding since floods can happen anywhere even in places that aren't considered high-risk areas for flooding.

Flood Insurance Guru - Flood Risk Verification Tool

Getting the right flood coverage with your home can really help you reduce the impacts of flood risk and bounce back from a natural disaster like this.

As we can see in this blog, this can also help you financially as getting the right flood insurance policy from the right insurance company can really impact your buying power.

So if you have additional questions that are related to flooding and flood insurance, make sure to visit our Flood Learning Center where we try to answer all your questions. Click below to start your flood learning with us!

Flood Insurance Guru - Flood Learning Center

Let's start simplifying your flood insurance. You only need to follow our three easy steps:

  • Fill out this form — Get A Quote
  • Talk with our flood education specialist.
  • Get back to the important things in your life.

We've recently covered one of the biggest changes coming to flood insurance and options. We're talking specifically about getting the private flood insurance option available for FHA-insured loans.

How To Switch FHA Flood Insurance to Private Flood insurance

You might be anticipating how you could do this and in this blog, we want to talk about how you can switch to a private flood insurance policy even if you have a loan with the Federal Housing Administration (FHA).

 

FHA Accepting Private Flood

You might be wondering why this change is a big thing for the flood insurance market. It's important to note that if you have an FHA loan you can only get a flood insurance policy with the Federal Emergency Management Agency (FEMA) and the National Flood Insurance Program (NFIP).

However, on December 21st, property owners will be able to get the private flood insurance option with the proposal that the Department of Housing and Urban Development (HUD) announced just his month. One of the goals of this proposal is really to give promote consumer options.

How To Switch FHA Flood Insurance to Private Flood insurance

This upcoming change can really help homes find more security and openness to private flood. It's important to note that, unlike federal flood insurance, private flood insurance coverage doesn't have limits.

Private flood insurance policies have the ability to go above $250,000 (building coverage) and $100,000 (content/personal property coverage). This coverage amount is generally what a standard flood insurance policy with the NFIP offers. Additionally, you can generally also have the option to get excess flood insurance and additional living expenses with private insurers.

How To Switch FHA Flood Insurance to Private Flood insurance

So you might be wondering now how to switch your FHA flood insurance to Private Flood.

 

FHA to Private Flood

Before you start canceling your flood insurance, it's important to keep in mind that there is a process that will allow you to get a private policy with an FHA-insurance loan.

First, you need to keep in mind that you can't immediately switch from your NFIP flood policy to a private policy since you have to wait for your renewal date to switch to admitted private insurers. This means that the switch can only be done on or before your renewal date.

How To Switch FHA Flood Insurance to Private Flood insurance

If you miss this period then you will be stuck with the current flood insurance policy and you will need to wait until the next renewal date before you can get that chance again.

You can only switch to a private flood insurance policy with an FHA-insured loan if you are doing a new loan. Take note that this new loan cannot be a line of credit loan. So, this will only be valid if you're switching from an FHA to a VA or USDA loan.

 

Canceling Your Flood Policy

One of the crucial things that you should do first is to send a signed cancellation letter for your flood policy to FEMA and the National Flood Insurance (NFIP). You would need to have this sent within 30 days of your renewal. This is crucial because FEMA and the NFIP may not cancel your flood policy renewal because a payment was already made by your FHA-insured mortgage.

Equally, you also need to send a copy of this signed cancellation letter to your bank especially if you have a mortgage. This is integral for you to avoid force-placed coverage. Make sure to watch our video below to understand what force-placed coverage is.

Changing Flood Markets

Introducing the availability of flood insurance from the private flood insurance market can really spell good things for fighting flood risks across the country. This move may really help encourage homeowners to get flood insurance to find sufficient protection against flood damage. This is especially true for those who are in special flood hazard areas.

Giving property owners more flood insurance choices either with a federal or private flood policy can really help in making sure that everyone is ready against floods.

 

If you want to know your flood insurance options, how to handle your flood insurance in Birmingham, or anything related to floods, click below to go to our Flood Learning Center where we try to answer these questions for you.

Flood Insurance Guru - Flood Learning Center

Ready to solve your flood insurance problems? Here are the steps you can take:

  • Fill out this form — Get A Quote
  • Talk with our flood education specialist.
  • Get back to the important things in your life.

Alabama has been really at the center of flood events and this type of incident may not help flood insurance for property owners across the state.

Is Affordable Flood Insurance coming to Alabama?

In this blog, we want to answer: Is affordable flood insurance coming to Alabama?

 

Flooding & Alabama

If you live in Alabama, flooding might not be new to you however these flood events still surprise homeowners across the state. One of the biggest flood events that happened in recent times is the flood of October 2021.

This was when around 6-10 inches of rain was dumped on the area causing widespread flooding. The Birmingham area alone received at least 4 inches of rainfall with central Birmingham receiving more than 6 inches of rainfall. This immediately led to flash flooding in the area.

 

So you might be wondering, how can I fight these flood risks that I face especially in Birmingham, Alabama in Jefferson County, and Shelby County?

 

PROTECTING ALABAMA

One of the best answers to this question is getting flood insurance however this may be challenging for property owners as some insurance companies in the private flood insurance market started to pull out of some parts of the state. This generally might be due to the higher risks that these areas face.

Since homeowners insurance policies generally don't have flood coverage, most of these homes are left to go run to the National Flood Insurance Program (NFIP) for a flood insurance policy. With Risk Rating 2.0 and the NFIP, average rates can be around thousands of dollars.

This is especially true if you already filed a flood insurance claim for that damage and it starts to get considered on your claims variable. However, this may change significantly once the proposal of the Department of Housing and Urban Development (HUD) kicks in on December 21st later this year.

 

FHA Accepting Private Flood Insurance

We recently talked about this new flood proposal to further strengthen flood insurance options for property owners. This proposal from the HUD aims to allow expand the availability of flood insurance options for FHA-insured loans.

 

Generally, this new proposal will allow the purchase of flood insurance through private insurance companies when previously FHA-insured loans can only get a flood policy from the National Flood Insurance Program (NFIP).

We've detailed this new bulletin in our blog which you can read by CLICKING HERE.

So why is this a big help for making flood insurance more affordable in Alabama?

 

Private Flood Insurance Option

In order to understand, why getting the private flood option added as a consumer choice for FHA-insured loans, we first need to establish how a standard flood insurance policy is different from the NFIP and private insurance companies.

A flood policy from the National Flood Insurance Program (NFIP) will provide coverage against flood damage for residential properties for a maximum of $250,000 on building coverage and a maximum of $100,000 on contents or personal property coverage. This amount can only go up to $500,000 if you have a commercial property.

Flood Insurance Guru - Flood Risk Verification Tool

This is where private flood insurance coverage can really be different. Generally, private flood insurers do not have any coverage limits. This simply means that you can go way above that $250,000 limit for building coverage. The same can be said for their protection on contents that can be much higher than $100,000. Moreover, you can also get additional living expenses with private flood.

How FHA Accepting Private Flood Impacts Coverage Requirements

Another difference is that wait periods are generally shorter. With the NFIP, you are going to see a 30-day waiting period for your flood policy to take effect on your insured building. On the other hand, most private flood insurance carriers can have your policy take effect from 7 to 15 days maximum.

 

Affordable Flood Insurance

So, with this proposal changing flood insurance options in Alabama, this could also mean that homeowners, business owners, and other property owners like renters or investors would be able to find an alternative with the NFIP. We might be seeing a decrease in flood insurance premium rates of around 20% to 30% just by going through private flood.

Get A Quote

Giving people more options on their flood protection can really also help encourage people to get flood insurance and really reduce the risks of facing millions of dollars in damage to structures.

If you want to know your flood insurance options, how to handle your flood insurance in Birmingham, or anything related to floods, click below to go to our Flood Learning Center where we try to answer these questions for you.

Flood Insurance Guru - Flood Learning Center

Ready to solve your flood insurance problems? Here are the steps you can take:

  • Fill out this form — Get A Quote
  • Talk with our flood education specialist.
  • Get back to the important things in your life.

One of the recent changes to the flood insurance industry is the new proposal to allow FHA loans for private flood insurance.

In this blog, we want to focus on the coverage requirements that you might see now that private flood insurance policies are going to be available for the Federal Housing Administration (FHA), the United States Department of Agriculture (USDA), and the United States Department of Veterans Affairs (VA) loans.

How FHA Accepting Private Flood Impacts Coverage Requirements

New Flood Proposal

We recently talked about this new flood proposal to further strengthen flood insurance options for property owners. The proposal from the Department of Housing and Urban Development (HUD) aims to allow expand the availability of flood insurance options for FHA-insured loans.

How FHA Accepting Private Flood Impacts Coverage Requirements

Generally, this new proposal that's expected to take effect on December 21st, 2022 will allow the purchase of flood insurance through private insurance companies when previously FHA-insured loans can only get a flood policy from the National Flood Insurance Program (NFIP)

We've detailed this new bulletin in our blog which you can read by CLICKING HERE.

Now, one of the biggest questions to come out of this proposal to allow private flood insurance policies for FHA, USDA, and VA loans is coverage.

Coverage with Private Flood

First, let's have a quick review of the flood insurance coverage you'll get from private insurers compared to the National Flood Insurance Program (NFIP).

Even with the Risk Rating 2.0, a standard flood insurance policy with the NFIP can only offer a maximum of $250,000 and $100,000 in building and content coverage respectively for residential flood policies. This is a different case when it comes to private policies because private insurers don't really have those coverage limits. Generally, this means that you can go above $250,000 for building coverage and $100,000 for personal property coverage.

With private flood, you may see some sufficient protection for your property. Now, that the private flood insurance market is going to be available as an option for your purchase of flood insurance, what does it mean for coverage requirements for your property?

Coverage Requirements with Private Flood

It's important to note however that a lender can require different coverage amounts when it comes to your flood insurance policy.

How FHA Accepting Private Flood Impacts Coverage Requirements

Currently, when it comes to lenders requiring coverage amount, you might be asked by your mortgagee or bank to insure your property for $250,000 or the amount for the replacement cost of your property or whichever is less between these two. This is generally because FHA loans are following the insurance regulator that's in compliance with the NFIP.

Now, it's important to note here that you are still expected to follow the 80% rule when it comes to the coverage amount regardless if you have a federal or private flood policy. This rule simply indicates that you need to insure your property for at least 80% of its replacement cost.

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One of the challenges with flood insurance policies with the Federal Emergency Management Agency (FEMA) is that you can't really go higher than $250,000. This could mean that if the replacement cost of your property is more than that amount, you might need to get a disaster loan if it's available through disaster assistance. If not, you're basically stuck with that coverage amount with federal flood insurance.

With the new proposal happening, you might see your bank requiring you to get more now that you won't have limits with private flood insurance coverages. This could easily mean that if you have a property with a replacement cost of $400,000, you will be able to get full coverage for it with a standard private flood insurance policy.

So, if your bank tells you that you need to get more flood insurance for your property, it's basically the best-case scenario because this would really help you avoid gaps in your flood insurance coverage.

Flood Insurance Guru - Flood Risk Verification Tool

FHA Accepting Private Flood

At the end of the day, this change might be one of the best to come for property owners and homeowners across the state. Being able to get a policy from the private flood insurance market can really help avoid unnecessary flood loss.

How FHA Accepting Private Flood Impacts Coverage Requirements

Although the potential increase in your coverage requirements can sound scary, it's more important to really make sure that you have the best protection for your property.

If you want to read our full breakdown of this new proposal from HUD, feel free to CLICK HERE to read more about it.

FHA Accepting Private Flood Insurance

Do you have other questions regarding FHA loans, Private Flood Insurance, or anything flood and insurance related? Click below to access our Flood Learning Center where we try to answer your frequently asked questions when it comes to flood insurance.

Flood Insurance Guru - Flood Learning Center

Ready to solve your flood insurance problems? Here are the steps you can take:

  • Fill out this form — Get A Quote
  • Talk with our flood education specialist.
  • Get back to the important things in your life.

Flood insurance options have always been a tug-of-war between federal flood insurance and private flood insurance. Historically, there are certain limitations to what flood insurance options you'll see and one of the key drivers of these options is your loan type.

FHA Accepting Private Flood Insurance

Today, we see one of the biggest changes in the flood insurance industry in general: we will start to see some support for private insurers even for FHA-Insured Mortgages. So, in this blog, let's talk about these changes.

Loan Types & Flood Insurance

First, let's talk about why this is a big deal.

Historically speaking, if you have a Federal Housing Administration (FHA) loan with your home or property, you cannot get any private flood insurance policy. Instead, in compliance with FHA loan terms, your only flood insurance option is through the National Flood Insurance Program (NFIP) or through Federal Emergency Management Agency (FEMA).

FHA Accepting Private Flood Insurance

This generally leaves a lot of homeowners facing some concerns about their coverage amounts since it's important to remember that the NFIP — even with their recent update of Risk Rating 2.0 — can only offer up to $250,000 for building coverage and $100,000 for contents or personal property coverage for residential properties.

Even if you want to get a private flood insurance policy, it's also very likely that your mortgage lender will not allow it.

The Private Flood Proposal

FHA Accepting Private Flood Insurance

This new proposal from the Department of Housing and Urban Development (HUD) looks to eliminate this wall and allow FHA loan mortgages to also get a flood policy from private insurance companies. This means that flood insurance options for FHA-Insured Mortgages are now expanding to accommodate either a federal flood policy or a private policy.

Generally, the goal is that even for FHA loans, flood insurance options are in compliance with the Biggert-Waters Flood Insurance Reform Act and allow consumer choice while further encouraging participation from the private sector of flood insurance.

FHA Accepting Private Flood Insurance

This proposal from HUD is expected to take effect on December 21st this year, but before you jump the shark and immediately switch from flood insurance, let's talk about some important things to keep in mind with this new rule for FHA-insured mortgages and USDA loans.

Things to Know

There are some conditions that you need to keep in mind before switching your NFIP policy to a private flood insurance policy.

  1. First, you can only switch to a private flood insurance company that meets the private flood insurance clause
  2. Private flood insurance should also provide you with coverage that is no less than what a standard flood insurance policy offers with the NFIP. This means that they at least need to have that $250,000 and $100,000 for building and content coverage with their offer.
  3. Your mortgagee still has the power to implement or ask for more flood insurance coverage than required. This is so they can protect the mortgaged property.
    FHA Accepting Private Flood Insurance
  4. Lastly, you can't immediately cancel and switch to private flood insurance even if this new proposal is already effective. You will still need to wait for your renewal to cancel and switch to admitted private flood insurance. This basically means that if you miss that window of opportunity to cancel during your renewal of flood insurance, you will be stuck with the federal flood policy.

Basically, this means that your private flood insurance still needs to follow the overall expectations that FEMA and the NFIP have. So, you might be asking what are the impacts of this new proposal on the private flood insurance market.

Birmingham, Alabama

FHA Accepting Private Flood Insurance

To answer this question, we will look at one of the states that's no stranger to flood risks: Alabama.

According to FEMA's estimation when Risk Rating 2.0 was implemented, about 79% of NFIP policyholders will see some form of increase of $0 and up to more than $100 in their premium rates. This generally hurt a lot of property owners especially when it comes to the real estate market.

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It's important to note here that, generally, properties that sit on Special Flood Hazard Areas (SFHA) or sometimes known as high-risk flood zones tend to scare potential buyers. If your property is in the SFHA, this could also mean higher amounts of flood insurance rates, especially with the NFIP.

You also have no way out of flood insurance since being in the SFHA generally means that there's a mandatory purchase requirement for flood insurance. Availability of flood insurance through private insurers simply wasn't an option.

This proposal could change that as properties will have the ability to enjoy flood insurance benefits and private flood insurance coverage. Generally, this could also mean that properties that were finding some trouble in getting sold through real estate will now find more potential buyers as the worry of expensive premium rates and limited flood insurance coverage will be eliminated as well.

FHA Accepting Private Flood Insurance

So, you might be wondering how this proposal can change and what's the big deal about flood insurance coverage with a private flood insurance company.

Coverages Through Private Flood

One of the key differences between a federal and private flood insurance policy is coverage.

Unlike flood policies from FEMA and the NFIP, private flood policies generally have more flexibility when it comes to your coverage. This could mean that you can definitely go above that $250,000 building coverage limit.

This can be a big help for property owners with more expensive properties. The same can be said for content coverage; you won't see coverage limits of $100,000 for personal property that you have within the insured building.

Additionally, some private flood insurance companies are also willing to provide excess flood insurance and some additional coverage such as additional living expenses. This coverage can easily provide coverage for the rent and other expenses you have as you wait for your property to be repaired.

FHA Accepting Private Flood Insurance

Generally, you might be seeing more coverage and a quicker process for your flood insurance since most private flood companies only have up to 15 days for their wait period.

Flood Insurance Claims

Another big thing coming out of this proposal is that flood claims will basically find a reset. If you choose to go through the private flood, your claims history with this new insurer will be coming from a clean slate.

This means that you may not see a premium rate increase due to the previous claims filed on the property when you were still doing a flood policy with the National Flood Insurance Program (NFIP).

Flood Insurance Guru - Flood Risk Verification Tool

However, it's important to note that flood insurance claims are one of the main determiners of whether or not your property will fall into the repetitive loss (RL) or severe repetitive loss (SRL) list. This could mean that if your property is listed as SRL, you might not be able to switch to private flood as these properties are required to get flood insurance through NFIP Direct.

Accepting Private Flood

Overall, this new proposal from HUD can really help FHA-insured loans when it comes to your flood insurance options. Does this new proposal also mean that you can't go back to NFIP once you make that switch to private flood? No, you can still go through FEMA and the NFIP in case you changed your mind or find the federal flood insurance to fit your needs.

Since this proposal is very new, we still need to wait for an official word if switching to private flood insurance providers will be available for homeowners with FHA-insured mortgages and who are in a nonparticipating community.

Get A Quote

It's also important to note that the HUD is looking to review this which is why they are open to hearing comments regarding the acceptance of private flood. So if you want to review this proposal, click you can refer to its official announcement by CLICKING HERE.

If you've got questions regarding this new proposal, whether can you switch to private flood, how to switch to private flood, or anything related to flood insurance, click below to access our flood learning center.

Flood Insurance Guru - Flood Learning Center

Ready to solve your flood insurance problems? Here are the steps you can take:

  • Fill out this form — Get A Quote
  • Talk with our flood education specialist.
  • Get back to the important things in your life.