This is no April Fool's joke, but a big change is coming to the claims process and rating for federal flood insurance.

In this article, we want to discuss the changes to the claims variable and how your flood insurance premiums are going to be impacted by the new claims rating system with the Federal Emergency Management Agency (FEMA) and the National Flood Insurance Program (NFIP). We want to discuss three (3) things that you to know about this upcoming change to flood insurance on April 1st, 2023.

Flood Insurance Claims

First, let's cover how flood insurance claims can impact not only your flood insurance policy but also how risks are viewed for your property or home.

When it comes to the federal side of flood insurance under the National Flood Insurance Program (NFIP), flood claims can directly impact your rates. This happens in two forms with Risk Rating 2.0: the Severe Repetitive Loss (SRL) and the Claims Variable. As a policyholder, it's important to keep in mind these keywords.

The Severe Repetitive Loss (SRL) list for properties indicates that the property has filed more than one flood claim in a 10-year period. Generally, this indicates a higher risk for flooding and will in turn impact the flood insurance premiums of a certain policy.

The claims variable on the other hand is the newer claims rating factor that was introduced with Risk Rating 2.0. Initially, this new system will clean the policyholder's flood claim history and start from scratch.

However, if a claim is filed and paid out, the policyholder will see a potential increase in premium rates as FEMA will conduct a 20-year lookback where they will count all of the flood claims made during that period. This claim variable will produce a number that becomes a multiplier for the rates and is dependent on the number of claims made during that period.

But what are the coming changes to claims with FEMA for April 1st, 2023?

3 THINGS CHANGING WITH CLAIMS

1. 10-YEAR WINDOW & CLAIM DATES

One of the big things to have changed when it comes to federal flood insurance claims rating factor is dates.

Previously, if you were to file a claim under Risk Rating 2.0 with FEMA, they will start to do a 20-year lookback which means that they will look at all the claims made on the property for flood insurance for the past 20 years. The number of claims made will be used as a claim variable which acts as a multiplier for your flood insurance rates.

This lookback is changed to only do a look back for 10 years only. This can make it easier for property owners to avoid a higher claim variable.

Another change that involves dates is more focused on when FEMA's claim rating factor kicks in. Previously, any and all claims made during Risk Rating 2.0 will immediately trigger the claim review. These claims may be from any time prior to April 1st, 2023.

Basically, all of the claims made in the past 20 years regardless of the date will be sent as part of the review. Generally, this could also mean that there will be higher rates due to having a higher claim variable. 

For this new update, you will have to file a claim on April 1st, 2023, or later for the claim review triggered. This simply gives more leniency and a chance for property owners to get more breathing space before claims impact their rates.

This is important because...

2. WHAT TRIGGERS THE CLAIM REVIEW

Before this upcoming update, even if you file just a single claim during Risk Rating 2.0 — which means any flood insurance claims made before April 1st, 2023 — will immediately trigger the review. This can really hurt especially with how flooding behavior has changed in the past decade.

With this update, you will now have to file 2 claims within this 10-year period for the claim review to be triggered.

We recently had a customer who had these troubles with the previous system where they had two flood claims made in the last 20 years but only one in the last ten years. In the Risk Rating 2.0 claim review, this meant that both claims will be part of the claims variable however with this update, only one of them will be considered. 

3. WHAT CLAIMS ARE EXCLUDED

Let's move into another category in this update which concerns more about what types of claims are excluded in the Risk Rating 2.0 review and which ones are excluded in this April 1st, 2023 update.

Previously, the only exclusions are for Increased Cost of Compliance (ICC) and Closed Without Payment (CWP). So this meant that if you filed a Loss Avoidance Claim, you will see this included. Generally, this meant that the previous system also uses Loss Avoidance Claims to trigger the claim review.

With this new update, Loss Avoidance Claims will be added to the exclusions. These are claims made for helping your property avoid damage from flooding which includes things like sandbagging, and creating temporary levees, or water pumps to name a few. Generally, this goes around for $1,000 with a standard flood insurance policy.

So you can imagine that if these are still to be included with the rating factor for claims, it could really become a burden for policyholders, but that won't be the case anymore.

You can see the full breakdown of what we discussed here:

These are the upcoming changes to how flood insurance claims work with federal flood insurance. If you are ready to take the next steps to get the right flood insurance coverage then there are three simple steps.

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

Got more flood insurance questions? Visit our Flood Learning Center below to know more:

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.

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.

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:

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 —
• 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!

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.

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.

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.

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.

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.

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

• Fill out this form —
• 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.

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.

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.

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.

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.

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.

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.

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.

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

• Fill out this form —
• 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.

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).

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

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.

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.
   
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

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.

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.

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.

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).

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.

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.

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

• Fill out this form —

• Talk with our flood education specialist.
• Get back to the important things in your life.