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.

Exactly 5 years ago, a category 4 hurricane finally dissipated however it still left a lot of flood damage in its wake especially over in the Houston, Texas area. The damage from this flooding alone was around $125 billion.

In this article, we look at how Hurricane Harvey could impact flood insurance policies, especially with the private flood insurance market for homes across Houston, and what it could mean in the future.

Hurricane Harvey: 5 Years Later

Hurricane Harvey was one of the most devastating disasters we've seen in recent times. This was the hurricane that submerged 25-30 percent of Harris County just for example. Other than the flooding that happened, it's important to note that this type of natural disaster has implications for the future of your flood insurance.

Let's compare what this could mean for both federal flood insurance and private flood insurance for those impacted by Hurricane Harvey.

Federal Flood Insurance

One of the more known flood insurance options is the National Flood Insurance Program (NFIP) under the management of the Federal Emergency Management Agency (FEMA). Although they don't really pick and choose who to provide flood insurance for, they will have considerations on the impacts of Hurricane Harvey on your property.

For example, now that the National Flood Insurance Program (NFIP) moved into the Risk Rating 2.0 program, if you made a claim due to the damages you got from Harvey, it will be forgiven. However, if you recently made a flood insurance claim then the NFIP will most likely do a 20-year look back and assess your claim variable.

This simply means that they will look into the last 20 years of the property's flood claims. Now, if you did more than 1 claim this could mean that your flood insurance rates will increase with the NFIP. This is something we should expect especially due to the fact that the Houston area has been getting floods recently.

Other than the increase in flood insurance premiums, generally, you still have an option to go through the NFIP without any problem. However, the same thing can't be said for private flood insurance.

Private Flood Insurance

It's a different story when it comes to the private flood insurance market, however. It's important to note that these insurance companies have the option to pick and choose who they provide flood policies.

This means that if the only flood insurance claim made in the past 5 years was due to Hurricane Harvey, then you wouldn't really have much trouble getting flood insurance policies from the private market. However, this can be a bit difficult as areas like Houston have been getting flooded more recently.

This system is mostly reliant on the private market's 5-year look back when it comes to flood claims. Private flood insurance companies would most likely choose properties that haven't flooded in the last five years or haven't made a flood claim in the last 5 years. This can be a challenge when finding flood insurance options, especially in some areas of Texas like Houston.

Flood Insurance Options

Does this mean that you won't be able to go through these flood insurance options then?

Not really. It's important to note that if you don't have existing flood insurance, it's best to secure one through either of these options (federal or private flood insurance).

The National Flood Insurance Program (NFIP) would still be able to offer a flood policy for your home regardless of the claims made with it. It's important to keep in mind that your flood insurance rates may increase due to claims and other factors which are considered under the Risk Rating 2.0 program.

NFIP flood coverage stays the same however with $250,000 for building coverage and $100,000 for content coverage for residential policies and only up to $500,000 in building coverage if you have a commercial policy.

Your flood risk will be calculated based on: foundation type, types of flooding and flood frequency that the property experiences, claims history or claims variable, the elevation of the property, and distance to water to name a few.

On the other hand, you may still see a private flood insurance option available especially in the Houston area however you might want to consider the type of loan you have as only selected loan types can go through the private flood.

Private flood has a more flexible system of flood insurance coverage which makes it so that your policy will have somewhat manageable rates. This means that the coverage limits that the NFIP has won't exist with private insurance companies.

At the end of the day, getting flood insurance is really the only option you have to fight against flood damage. As we move towards the hurricane season for 2022, it's best to be prepared against flooding. 

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

• Fill out this form by clicking here.
• Talk with our flood education specialist.
• Get back to the important things in your life.

 

Flood insurance rates can hurt the wallet. Wouldn't be nice if your wallet was impacted less? The NFIP is trying to modernize the program to do that.

In this blog we will discuss this problem, the solution that is being offered, and how to put time and money back into your life by simplifying these changes

However, even with this update — which was made live for all policyholders on April 4, 2022 —, a new legislative proposal is still at hand. Let's talk about the seventeen (17) proposal reauthorization with the Federal Emergency Management Agency (FEMA) and how it can impact flood insurance.

The NFIP Reform

Congressional leaders outlined in their Legislative Package Reform some of the principles they are planning for the National Flood Insurance Program (NFIP)'s priorities in the long run.

It's important to note that despite the changes with Risk Rating 2.0, there are still a lot of concerns that flooded residents outside of flooding alone. One of the biggest concerns is flood insurance premiums being too high for most policyholders.

Hence, the NFIP proposal for reform is intended to include the following things which boil down to the following:

• Affordability of flood insurance for low-and-moderate income families
• Risk communication and flood risk mitigation
• Reducing flood risks and addressing repetitive loss properties
• A sound and transparent financial framework

So what do these four entail? Well, look no further as we'll discuss it here.

Financial Framework

First, we need to address the biggest concerns that residents have with federal flood insurance: flood insurance rates.

It's no secret that there are bound to be some increases on your premium rates once that RIsk Rating 2.0 kicks in. We can owe this to the fact that your full flood risk is being taken into account when it comes to your policy.

1. Making NFIP Sustainable

One of the biggest concerns with the Federal Emergency Management Agency (FEMA) and the NFIP is that it's still reeling from the debt it has which increases per year.

The proposal looks to clarify the National Flood Insurance Act of 1968 (NFIA) to support full-risk rates. This way, a sounder financial framework is being established for policyholders.

A full-risk premium rate with flood insurance is the rate that's being charged to a group of policies. Generally, this causes the premium rate of flood policies to be calculated as a group to make it more sufficient to pay any anticipated losses and expenses.

This means that if you're doing a policy that covers multiple buildings, you might find it easier to manage your premium rates as this will follow a full-risk rating method.

2. Borrowing Authority

Another thing coming up with this proposal is aiming to eliminate interest for future debt and decrease how much the NFIP can borrow. This means that the National Flood Insurance Program (NFIP) is only allowed two-thirds of total premiums in force.

It's important to note that this has a direct impact on the availability and affordability of flood insurance with the NFIP.

3. Financial Resilience

The NFIP proposal also looks to provide some form of resiliency and reliability with the federal flood insurance option.

This comes in the form of allowing liquidity in order for you to be able to quickly get your flood insurance claim paid. This also looks to provide that without any problems in the future.

Communicating and Analysing Risks

Another thing — what might be the most important one — that the proposal is looking to reform is how residents get information on their property's flood risk.

Here are the new provisions that this NFIP reform is looking to propose.

4. Risk-Informed NFIP

There are two things that this item covers: flood maps and information on flood risk.

FEMA is looking to simplify and provide clarity on how flood insurance rate maps really impact federal flood insurance. So, instead of simply saying that your house is in a flood zone, this reform aims to provide an understanding of where flood insurance is required.

This is really important considering how Risk Rating 2.0 is moving flood zones as a regulatory basis for flood insurance and not premium rates.

Now, when it comes to risk information, the proposal aims to enhance flood insurance products that help understand what flood risks really are and, rates-wise, how they impact flood insurance quotes and policies.

5. Flood Risk Disclosure

Another concern that this NFIP reform is looking to change is how flood risk is being shared with property owners.

Generally, the property's flood risk is either made known to the buyer after the real estate transaction or during the sale. This also applies to renters and not just property owners. Hence, the proposal looks to require full disclosure for participating communities on what risks the houses are facing when it comes to flood risk.

For floodplain management of participating NFIP communities, this means that there must be at least a minimum flood-risk report sent to the seller and lessors before they even close the deal.

Simply, this means that you will get to see firsthand the flood risk you are facing.

6. Replacement Cost Value & Premium Rates

For this one, the proposal is more concerned with how premium rates are being calculated. This reform looks to use the replacement cost value (RCV) or the value of the property in determining the flood insurance rates.

Generally, this looks to help you get a sign and understand the true risk for flooding that your property is facing. This proposal somewhat echoes what Risk Rating 2.0 aims to do which is to accurately provide flood risk.

7. Coastal Zones and Inland Areas

Another thing that we're seeing with this proposal is how coastal zones and areas are being separated from inland locations.

We have seen how flood zones are being overhauled to also address the flood risks for coastal areas such as the Coastal AE zones. This is being done in order to get a better understanding and rating for the two different areas.

Improving Resilience

8. Multi-Year Reauthorization

One thing that most people might not know about the National Flood Insurance Program (NFIP) is that its original authorization expired in September of 2017. You might be wondering by now, how were they able to provide flood insurance in the past few years?

This is because the NFIP is clinging to short-term extensions. However, the proposal is looking to extend the reauthorization up to September 30th, 2031.

Getting authorization means that FEMA and the NFIP will be able to provide flood insurance for residents across the country until the next 9 years. This also means that they get to sell and service flood policies even during a lapse of appropriations.

9. Means-Tested Assistance

Now, this is one of the biggest things coming out of this NFIP reform program is how low-to-moderate incomes are being considered when rating properties.

What does this mean? Flood insurance policies will be easier to manage because of the graduated discount benefit for both current and potential residential properties that will purchase flood insurance from these areas.

You might be wondering what's being considered low-to-income households. According to the proposal, these households are those that fall at or below 120% of the Area Median Income.

At the time of writing, the initial estimate of median household income is around $76,000 in a report from April 2022. Now, it's important to note that this consideration depends on where you are.

10. Excessive Loss Properties

A new form of loss properties is being added with this proposal termed "Excessive Loss Properties" or simply XLP. A property is going to be listed as XLP if four or more flood claims and their respective payments of at least $10,000 were made in the life of the property.

Due to this indication of constant flood loss on the property, FEMA will have the discretion to not provide flood insurance. This means that if your house is listed as XLP — due to more than 4 instances of incurring flood damage — you won't be able to go through federal flood insurance for your policy.

It's important to note that an update to repetitive loss (RL) and severe repetitive loss (SRL) definitions are also in place with the existence of the XLP. A property will be considered a repetitive loss (RL) if it incurred two or more separate claims payments of any amount that goes beyond the loss-deductible in your flood policy.

On the other hand, a property will be listed as severe repetitive loss (SRL) if it incurred flood damage and receive a claim payment for four times or more. The claim must be $5,000 with a total amount of $20,000.

How To Get Out of Repetitive Loss

It's important to note that it's not the end of the road if you were to get listed as an RL, SRL, or XPL, you can still have your property removed from that list and avoid increased rates and/or unavailability of NFIP insurance.

The only way to do this is to have your property follow and comply with flood mitigation standards set by your state's floodplain ordinances.

11. Compliance & Mitigation Coverage

Another good thing coming from this proposal is that following and complying with flood mitigation standards will allow policyholders to get higher coverage limits.

It's important to note that the NFIP still follows the $250,000 limit for residential policies and the $500,000 limit for commercial policies when it comes to building coverage. This also includes the $100,000 content coverage limit.

This is being proposed to change depending on how much mitigation you have on your insured property. Simply, the more mitigation you have against flood, the higher coverage limits will be offered for your flood insurance.

12. Effectiveness of Mandatory Flood Insurance

Flood insurance with the NFIP would automatically be required for properties that are in the high-risk zone. It has been this way from the Legacy Program up to the current Risk Rating 2.0.

However, the proposal looks to study if the NFIP's requirement when it comes to mandatory flood insurance meets Congress' goal to increase the number of residents, both renters and property owners, covered by flood insurance in low-income areas.

13. New Construction Properties

An important proposal that the NFIP reform includes is that there might not be a federal flood insurance option for properties that are new construction or under construction in high-risk areas like Flood Zone AE. This proposal is also applicable to commercial properties.

This aims to promote the private flood insurance market which is constantly growing. The NFIP will be looking to increase the competition for flood insurance companies on the private side to provide coverage for these highest-risk areas and commercial properties.

14. Increasing Coverage Limits

Considering the increased housing prices in the country, the endorsement is also looking to increase the limits on flood insurance coverage provided by the NFIP.

This means that we might not be seeing a $250,000 and $100,000 limit in building and content coverage respectively. The proposal mentions that this is due to property owners being underinsured in the event of a total loss. We will have to wait and see what this coverage increase will offer for NFIP policyholders.

 

Technical and Operational

Lastly, there are some technical and operational changes coming from this proposal as well. This involves filing a suit, reporting complexities, and removing barriers to switching to private flood.

15. Period to File Suit

Now, it's possible that there might be an instance where your flood claim with the NFIP will not go through. Although this is the worst-case scenario, it's still good to know the clarifications being made when you file a suit.

The proposal states that you must exhaust the administrative appeals process before starting a lawsuit. This also means that you only have no later than 90 days from the appeal decision date to file a suit if any.

16. Reducing Reporting Complexities

The NFIP is also expected to get a reduced number of reports to file for congress. The proposal is looking to change the 15 reports in a span of two years will be brought down into 4 reports only while making sure that the information being provided is still timely and sufficient.

17. Removing Barriers for Private Flood Insurance

Although this proposal is offering the thirteenth item in somewhat favor of private flood, they are also balancing this with this removal of barrier when switching to private flood.

What does this mean? The proposal says that policyholders who have a lapse of NFIP coverage, generally due to switching to private flood, won't have the premium discounts they have with the NFIP.

This means that if you ever switch to private flood and eventually switch back to the NFIP, you might be seeing a very different increase because they won't allow you to retain the discounts on premium rates you once had.

As we mentioned, there are a lot of changes coming to federal flood insurance, but will these proposals be better for policyholders and give you a competitive option with FEMA and the NFIP? For now, only time can tell.

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

• Fill out this form by clicking here.
• Talk with our flood education specialist.
• Get back to the important things in your life.

We want to help simplify flood insurance for you so that you can find more time in enjoying life's beauty.

Just a week ago, we've seen another case of flooding in Birmingham, Alabama. The city just couldn't get a break from floods.

In this article, we look back at the plans to lower flood risk in Jefferson County and help reduce the amount of flooding that happens in communities in Alabama. We also talk about how this can impact flood insurance in the long run.

Birmingham, AL Floods

Last week, a storm went past Birmingham, but it didn't leave without a mark. As water came down on the Saturday of July 9th, roads were easily flooded. This left a lot of drivers to find ways to navigate flooded roads.

This type of scenario isn't really new to Birmingham, Alabama. This is why National Weather Service (NWS) hydrologist Roger McNeil looked at the flood-prone creeks that easily help to flood in Birmingham and other nearby communities in Jefferson County.

These flood-prone creeks include the Village Creek in Birmingham wherein a $4.8 million project is planned to relocate sewer lines. It's important to note that the areas around the creek are in a high-risk flood zone which some would call the 100-year floodplain or flood zone A and AE.

The Five Mile Creek in the Ketona-Tarrant area however is still looking forward to getting financial help to mitigate flooding and reduce flood damage in the nearby communities around the creek.

These are just some of the areas that Roger McNeil found to have a high risk for flooding. If you want to read the full article, click here.

But how does this relate to flood insurance?

Flood Insurance in Birmingham, Alabama

One thing you'll be able to notice in these communities is that most of them are being put in a floodplain due to being close to a water source. This is one of the Federal Emergency Management Agency's (FEMA) flood risk factors that now directly impact your flood insurance premiums. This is through the Risk Rating 2.0 program.

More than the impact on premium rates, being close to any body of water speaks to your flood risks. We've seen this in the same article as businesses on Highway 31, that are close to Patton Creek in Vestavia Hills, are required to carry separate flood insurance. This is due to the fact that these businesses are in a floodplain or a high-risk flood zone.

These creeks in Alabama, especially in major cities like Birmingham, contribute to the increased flooding in the state.

Why Flood Insurance is Important

There is no other insurance that can cover flood damage. The fact that we're seeing increased flooding across Alabama shows that you don't need to be in a high-risk flood zone to get flooded.

Flood insurance can provide coverage for damages on both the building or the structure of the property and the contents and everything inside the insured property. Depending on where you're getting your flood insurance from, this coverage can be as high as $250,000 for building coverage with $100,000 for contents coverage.

But this is only applicable if you're buying flood insurance with the government-backed National Flood Insurance Program (NFIP). However, it's a different story when it comes to private flood insurance as they provide more flexibility when it comes to flood insurance policy coverage.

Watch the video below to see a more in-depth discussion of the difference between federal and private flood insurance.

Floods are becoming worse recently and are also becoming more frequent. Keeping a property without flood insurance is bound to really cause some big headaches. If you have questions on flood insurance in Alabama and Birmingham City, you can visit our Flood Learning Center by clicking below.

Remember, we want to simplify flood insurance through education so that we can help you avoid problems and keep the value of your property long-term.

So you want to buy a flood insurance policy from the Federal Emergency Management Agency (FEMA). Well, you won't have to worry about how to get a policy directly from FEMA because there is the Write-Your-Own (WYO) Program.

In this article, we talk about everything you need to know about WYO policies and why the Write-Your-Own Policy helps make the process of getting flood insurance coverage from FEMA and the National Flood Insurance Program (NFIP) easier.

Write-Your-Own Policy

When looking at flood insurance options, you'd be remiss to think that the NFIP and Private Flood Insurance are two separate worlds that can never meet.

This is far from the truth as FEMA and the NFIP actually built a cooperative in 1983 as a form of partnership with the private flood insurance industry. This is called the Write-Your-Own (WYO) Program.

This created a system wherein you don't need to bother and go through all the hassle of getting a flood policy from FEMA.

Generally, the Write-Your-Own (WYO) Program helps you find an alternative way to process your NFIP policy through other insurance companies. At the time of writing, FEMA reports that there are at least 50 participating insurers or carriers.

If you want to see what insurance companies are participating in the WYO program, CLICK HERE to go to FEMA's official list.

What's The Difference?

Now, you might be starting to wonder: what's the difference then?

When it comes to the Write-Your-Own, it basically allows other insurance companies outside of FEMA and the NFIP to provide insurance support for operations and everything needed to write an NFIP policy. This makes it easier and quicker to understand your flood risks, especially with the updated Risk Rating 2.0.

The insurance companies participating in the WYO are allowed to both process the writing of your flood policy, managing of the documents, and use their resource to help you get your flood insurance easier.

The same also applies when you file a flood claim where you will see the participating company to help you get your flood insurance claim get processed.

It's important to note, however, that policies that are written under the WYO still follow FEMA and NFIP's coverage and rates. This should be your heads up especially considering that all federal flood insurance policies are now officially following the new Risk Rating 2.0 program.

Generally, this means that you will still see a $250,000 limit for building coverage for residential properties or up to $500,000 max for commercial properties with a $100,000 contents coverage.

Getting a WYO policy also means that floodplain management regulations (i.e. flood insurance rate map) set by the federal government will be strictly in place and participating companies are expected to follow it.

Want To Learn More?

If you want to know more about the benefits and differences between the Write-Your-Own Program and NFIP Direct, listen to our podcast below or read our blog post on Write-Your-Own and NFIP Direct:

If you still have questions on flood insurance, click below to go to our Flood Learning Center. You could also contact us so we can discuss your flood insurance needs.