5 Things Captive Insurance Agents Need to Know About Flood Insurance

Flood Insurance can be complicated and confusing. In fact, these are two of the top reasons why captive insurance agents do not offer flood insurance to their clients. 

So what exactly is a captive insurance agent? This an insurance agent that generally represents one company like a good neighbor mayhem agent. As a captive insurance agent flood insurance can be challenging especially if it only comes across your desk a few times a year.

We are going to discuss 5 things to know about flood insurance, so you can better help protect your clients when it comes to flood insurance and flood damage.

Flood Insurance Options

As an insurance agent, it is important to know what flood insurance options are available,  Most captive insurance agents have access to the National Flood Insurance Program (NFIP) either through a Write-Your-Own carrier or NFIP direct.

Both of these options are through what many refer to as federal government flood insurance. These flood insurance policies will offer the same pricing and the same amount of coverage. 

Before we talk about some differences here remember home insurance policies generally do not cover flood damage.

Let's take a look at the Write-Your-Own carrier option first.

These can be great options as they provide great support for the insurance agent and property owner. They can also help the property owner through the flood insurance claim process. However, Write-Your-Own flood insurance policies do not meet every scenario with flood insurance through FEMA.

On the other hand, a few policies have to go through something called NFIP direct. These types of policies are generally properties that have had flood insurance claims or flood damage in the past. These are properties generally with severe repetitive losses (SRL) or repetitive losses (RL).

This is when a property has had multiple flood losses within a 10-year period. It is always a good idea to be appointed with NFIP direct if you can be. You can click here to get an appointment or visit our insurance agent program for more information.

While Write-Your-Own and NFIP direct are two flood insurance options, they are not the only options. Let's take a look at private flood insurance.

Private Flood Insurance

What is private flood insurance? Unlike the National Flood Insurance Program which is through the federal government private flood insurance is through a private insurance company. 

Private flood insurance has many benefits over the National Flood Insurance Program (NFIP). The table below shows some of those differences. As you can see, private flood insurance can offer higher amounts of flood insurance coverage compared to the National Flood Insurance Program. In many situations, they can offer cheaper flood insurance pricing as well. 

There are many private flood insurance companies out there and each one looks at risk differently. So maybe your insured has received a non-renewal notice this does not mean all private flood insurance companies are going to non-renew the customer.

If you would like to see what private flood insurance pricing looks like click below to get a flood insurance quote.

Will Bank Accept Flood Insurance Policy

In reviewing these different options with your client it's important to understand if the bank will accept the flood policy. There are many situations where the bank would not accept a flood insurance policy. It could be that there is not enough coverage on the policy or the reason we are going to discuss now which is the loan type.

Loan types can have a big impact on flood insurance options. One reason is currently as we write this article FHA loans only accept policies through a write-your-own carrier or the NFIP direct. Regardless it has to be a FEMA-backed flood insurance policy.

This is one of the benefits of doing loans like conventional loans. It gives you more flood insurance policies on

 the property.

Now let's take a look at deductibles.

Deductibles

On a standard homeowners insurance policy you are going to have one deductible. However, because flood insurance is a separate policy deductible work differently. On a flood insurance policy with NFIP, you could have two deductibles. One for the building and one for personal belongings. 

On private flood insurance, you could have 3 deductibles. One for the structure, one for personal belongings, and one for additional living expenses. So when picking a deductible you have to be careful picking a high deductible because it could add up quickly. 

Now let's take a look at actual coverages on a flood insurance policy.

Replacement Cost and Actual Cash Value

When helping a customer set up a flood insurance policy you need to understand what type of loss settlement payout will happen on a claim.

This is where replacement cost plays a crucial role. When it comes to the National Flood Insurance Program the rule is 80% of replacement cost or the max amount of coverage available through the National Flood Insurance Program. If it meets this condition then replacement cost would pay out up to $250,000 on a residential flood insurance policy.

On private flood insurance, the general condition is 80% as well. If not it would default to an actual cash value policy.

This means depreciation would be pulled out of the total flood claims amount before you would receive a claim payment.

Claims Impact on Flood Insurance Rates

When educating clients on flood insurance claims it's important to understand how these can impact flood insurance rates with the National Flood Insurance Program and private insurers. Let's look at NFIP first. FEMA recently switched over to a new program called NFIP Risk Rating 2.0.

This new flood insurance modeling program looks at flood risks differently. One thing they look at now is something called the claims variable. When a flood claim happens they do a 20-year look back and if multiple flood insurance claims have happened they use this as a driving factor for rates on the flood insurance renewal. 

Private flood insurance looks at claims differently. In many situations, they will non-renew a flood insurance policy. This means the property owner would have to find different coverage at the renewal date. 

As you can see it is important to educate the property owner on the claims process and how claims can impact rates and the availability of flood insurance. When it comes to natural disasters claims should be filed in catastrophic situations.

Knowing these 5 things can help you better protect your client from having a bad flood insurance experience. If you want to learn more about flood education you can visit the flood learning center here.

If you are ready to take the next steps to purchase the right flood insurance click below.