Home insurance companies are offering a new water endorsement for homes across the country.

In this article, we're going to talk about the dangers of using these water endorsements as a replacement for flood insurance. We're going to cover important things to know about these insurance products, and we're going to show you how you could lose your home if you have either of these insurance products.

Dangers of Using Water Endorsement For Your Flood Insurance

Water Endorsement Dangers

Now, it seems that this new water endorsement from your homeowner's insurance policy might be the best deal since it will help you avoid getting another policy just for flood damage. However, one of the biggest dangers of using this as a replacement for flood insurance is coverage.

Let's do a quick review first of what flood insurance offers for your protection against flood damage.

Flood Protection

First, let's define what flooding is. This is when at least 2 acres or 2 properties are inundated by water. This may be due to heavy rain, overflow of rivers or any body of water, or snowmelt. This is the same rule that flood insurance follows.

If you go through federal flood insurance and the National Flood Insurance Program (NFIP) under the Federal Emergency Management Agency (FEMA), you will be able to get at most $250,000 for building coverage with a maximum of $100,000 for contents or personal property inside that home.

Dangers of Using Water Endorsement For Your Flood Insurance

On the other hand, this water endorsement will generally cover ten to fifteen percent (10% - 15%) of what a standard flood policy offers. This means that you're only going to get around $20,000 to $30,000 for flood coverage.

Although it follows the same rules of what is considered a flood, since different homes have different prices, this may present some benefits or potential disadvantages. Depending on your insurance provider, this amount may have the same limits as your sewer or drainage backup up to the dwelling limit.

Dangers of Using Water Endorsement For Your Flood Insurance

As much as this water endorsement may be beneficial for you, it may not be able to really address the coverage needs you may have when it comes to flooding. Generally, this amount may not be able to fully cover the replacement costs of your home.

It's also important to note that, unlike flood insurance services, water endorsement won't be able to cover all of your property that's been affected by flooding. This is especially true if you're living on a property in a high-risk flood area or near a body of water where flooding can happen drastically in a short period of time. 

This coverage may only cover your basement and the first floor however anything past that might not be part of your coverage.

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Availability

You might be thinking of saving more of your money by canceling your flood insurance and using water endorsement as your flood protection. We generally discourage this since it also presents a danger when it comes to your insurance coverage.

Water endorsement availability also depends on your insurer as there may be insurance providers that don't have this type of additional coverage.

Flood Insurance Guru - Flood Risk Verification Tool

Generally, by doing this it may also mean that if your homeowner's insurance is nonrenewed, it will take your flood coverage with it. Once your homeowner's insurance is canceled or nonrenewed by your insurance company, you might not be able to get this water endorsement from a different insurance provider since it's basically embedded with the policy.

Dangers of Using Water Endorsement For Your Flood Insurance

This is a different case with flood insurance being a separate policy that won't really be impacted if such that situation happens.

This water coverage is not going to be easily acquired too. This is because your mortgage lender or bank will likely be the one to determine if the policy limits of this new water endorsement will be enough for your home. Simply put, if your bank will not accept this coverage, you might still need to get a separate flood insurance policy.

How Flood Insurance Helps

This new water endorsement may not really be able to give full coverage unlike a separate policy like flood insurance. So relying everything on your homeowner's policy may not be the best line of defense as a property owner for property damage due to floods.

Although it may be risky to rely your flood protection on water endorsements solely, it may also be of great help if you combine it with an existing flood insurance policy. This could mean that you can go past certain policy limits of flood insurance coverage by using water endorsement from your homeowner's insurance policy as excess flood insurance.

You may also find more comfort and security by knowing that you can get around $270,000 just for building coverage alone with the water endorsement and your standard flood policy coverages combined.

Dangers of Using Water Endorsement For Your Flood Insurance

At the end of the day, you shouldn't settle for less when it comes to the protection of your property and investment. Floods can happen anytime and most times, even just an inch of flood can cost thousands of dollars in property damage.

If you've got questions regarding this new endorsement with homeowners policies, how flood insurance premiums are determined, or anything related to flood insurance, click below to access our flood learning center.

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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.

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: Impacts on Flood Insurance

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.

Hurricane Harvey 5 Years Later: Impacts on Flood Insurance

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.

Hurricane Harvey 5 Years Later: Impacts on Flood Insurance

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).

Hurricane Harvey 5 Years Later: Impacts on 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.

Hurricane Harvey 5 Years Later: Impacts on Flood Insurance

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. 

Find My Flood Risk & Flood Rate

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.

 

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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

Modernizing The National Flood Insurance Program (NFIP)

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.

Modernizing The National Flood Insurance Program (NFIP)

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.

Modernizing The National Flood Insurance Program (NFIP)

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.

Modernizing The National Flood Insurance Program (NFIP)

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.

Modernizing The National Flood Insurance Program (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.

Modernizing The National Flood Insurance Program (NFIP)

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.

Modernizing The National Flood Insurance Program (NFIP)

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.

Modernizing The National Flood Insurance Program (NFIP)

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.

Modernizing The National Flood Insurance Program (NFIP)

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.

Modernizing The National Flood Insurance Program (NFIP)

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.

Modernizing The National Flood Insurance Program (NFIP)

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.

Modernizing The National Flood Insurance Program (NFIP)

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.

Modernizing The National Flood Insurance Program (NFIP)

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.

Modernizing The National Flood Insurance Program (NFIP)

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.

Modernizing The National Flood Insurance Program (NFIP)

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.

Modernizing The National Flood Insurance Program (NFIP)

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.

Modernizing The National Flood Insurance Program (NFIP)

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.

Modernizing The National Flood Insurance Program (NFIP)

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.

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

 

 

2020 has been a year that no one will ever forget. There are three things we want to look at in 2020 and how they could impact the future of coastal private flood insurance.

  1. Covid
  2. Social Injustice
  3. Hurricanes

 

                                                           Covid

When Covid hit in March of 2020 it caused many businesses to come to a crashing halt.

The hospitality industry has basically been non existent and you couldn't pay someone to get on a cruise ship. Airlines are barely surviving. As this happened businesses turned to their insurance companies for coverage.

However many were surprised to find out that most insurance policies don 't cover this type of disaster. Government put pressure on insurance companies to provide coverage. However its difficult to provide insurance coverage when a premium was not charged for a risk.

As these businesses started to close they started to cancel their policies. This started to impact insurance companies as businesses were no longer needing insurance for a closed business. While this was a minimum impact on the bottom line when you add the next two things it creates a major problem.

 

                                 Social Injustice

2020 has seen the rise of social injustice and unrest across many parts of the country. Portland Oregon has seen many businesses burned and even Atlanta Georgia saw businesses damaged after a man was killed in an altercation with police. 2020 was problem the first time in 50 years that you have seen moratoriums put in place by insurance companies for selling business insurance.

At one point Target had to close its Minnesota stores because of looting.

 

                                                Hurricane Season

Now onto the third maybe the biggest thing to impact insurance companies in 2020. The 2020 hurricane season was predicted to be busy but no one predicted it to be this busy. In fact NOAA has had to make several adjustments to their hurricane predictions for 2020.

As we write this blog at the end of October in 2020 we have had 27 named storms, 11 hurricanes have made landfall in the U.S. and 5 hurricanes have made landfall in Louisiana.

This ties the record for most landfalls in a year within one state. Florida set the same record in 2005.

Hurricane Sally, Marco, and Delta have all created major damage in the gulf states. In fact Delta and Sally made landfall only 15 miles a part.

Like most people in 2020 insurance companies are eating through their reserves fairly quickly and they are discovering that many of their risk models were off.

So what does this mean for coastal states like Florida, Alabama, Mississippi, Louisiana, and Texas.

In Mississippi we are already seeing some private carriers halt business completely and we have seen this in Louisiana for a few years. Texas has also had this issue since Harvey.

We could see this pattern start to work its way towards Florida and Alabama.

Does this mean flood insurance will not be available?

No

The National Flood Insurance Program is available for properties where communities participate. It just means that the private flood insurance options could be limited for a while.

This will be a crucial time for you to work with an insurance agency that can defend your risk?

What does this mean?

This means being able to show how a risk may have changed because of mitigation efforts even if it has flooded. We see customers rejected everyday because someone did not defend their property correctly.

If you have questions about what your flood insurance are in these areas then click here. You can also check out our

where we do daily flood education videos. You can also check out our

Remember we have an educational background in flood mitigation. This means we are here to help you understand your flood risks, flood insurance, and mitigating your property.

 

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

Why Flood Insurance is Important for Birmingham, Alabama

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.

Why Flood Insurance is Important for Birmingham, Alabama

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.

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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.

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It's the question that gets asked probably a hundred times a week. Insurance agents, property owners, and even banks want to know the answer.

Everyday we see FHA loans fall apart because of flood insurance. Many times flood insurance through the National Flood Insurance Program can be higher. Then you might have to pay the cost of an elevation certificate.

In 2019 FDIC made a major move in the industry when it started to allow private flood insurance.

People assumed this meant FHA would start accepting private flood insurance. However, because FHA insures loans they have different guidelines they do not accept private flood insurance. As of July 2022 FHA still only allows flood insurance through the National Flood Insurance Program, but hopefully, that will be changing soon.

On November 10, 2020 FHA made an announcement they were looking at accepting private flood insurance. They opened up a 60 day comment period for people to leave comments on this possible action.

So what happens next and what will be the impacts?

 

What's Next

After this 60-day comment period FHA will look at the comments and probably make a decision by the 2nd quarter of 2021. If they decide to approve it then they would probably delay it going into effect by 6 months. This is what FDIC in 2019.

So what could the impacts be?

 

The Impact

Well if you currently have an FHA loan then these could possibly cause a major decrease in your mortgage payment. You might see a 40% rate decrease in the private market.

 

However if this is passed don't go and try to jump to the private market right away.

FEMA has strict guidelines for cancellation. Unless you are refinancing your house you may not qualify until your policy is up for renewal.

 

In 2019 we saw a lot of people lose money because of FEMA cancellation rules. Many times private carriers require payment up front and charge minimum earned premiums.

This means you might be out 25% of the money you paid for a private policy because FEMA won't let you cancel.

 

We will continue to monitor this situation and continue to educate the public as this process moves forward. If you have questions about your flood insurance options then click here.

Want to learn more about flood insurance?

Check out our YouTube channel and Podcast.

Remember we have an educational background in flood mitigation which means we are here to help you understand flood risks, flood insurance and mitigating your property long term.

 

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Flood zone AE also referred to as the 100 year flood zone has the highest premiums other than coastal areas. These are generally because most of the structures have a negative base flood elevation. So what determines the premiums of these zones?

Well there are a few things that have a major impact on flood premiums in these zones. The age of the structure, the foundation type, flood loss history, and the elevation of the home.

Let's start with the age of the structure depending on when the house was built it will have a different rating model through FEMA. Its based on the first flood map for structure which generally occurred after 1978. If it was before the first flood map its called a PreFirm structure and if its after the first flood map its called a PostFirm structure. One of the big differences between these two types of structures is called grandfathering where you can keep the property in a preferred flood zone that no longer exists. This is allowed on PostFirm structures but not PreFirm structures.

The next thing that has a major impact on flood insurances rates in flood zone AE is the foundation type. Let's start with crawlspaces above grade compared to subgrade. Above grade is a crawlspace that sits above ground and subgrade is going to be crawlspace that sits partially below ground. The big difference here is subgrade generally will sit a certain level below the base flood elevation which increase the premium. While above grade sits above ground it could still be below the base flood elevation. The difference is things like flood vents can significantly lower the premiums with above grade crawlspaces.
The next type of foundation that will have a major impact on premiums are basements. As you can imagine basements can sit a good distance below the lowest adjacent grade creating a significant negative elevation. This can have a big difference on the rate so its very important to understand this when owning a house and purchasing a house. Also just because a basement is below grade does not mean that it is below the base flood elevation. Now that we have talked about foundations lets talk about how the elevation of the home in a flood zone Ae can impact the rate.The only real way to know this is to have a survey or elevation certificate completed. Now that we have discussed how the elevations of a home can have a major impact on flood insurance rates as you can see from the different foundation types.

Lets talk about positive elevations first and how they can have a big impact. The further your home is above the base flood elevation the better the rate is going to be. If all the elevations of your home are above the base flood elevation your home might even qualify for a letter of map amendment. This means that your property might be removed from the high risk flood zone and placed in a low risk flood zones causing a big improvement to property values. Now lets talk about the impact of negative elevations. As mentioned above basements can cause a home to have an extreme negative elevation. The higher the negative elevation a home has the higher probability of a flood occurring. This can create a double edged sword because the NFIP rates can be through the roof sometimes exceeding $10,000 a year for non coastal properties. However the other problem is the higher the negative elevation the less likely that a private insurance carrier will offer coverage on a property. So these are some things to think about when buying a home with a basement or building a home. we have discussed the impact foundation types can have on a structure lets talk about flood loss history.

Flood losses can have a major impact on a property. It could even stop a property from selling if severe enough. Generally when one flood loss occurs you would lose the preferred rating with the NFIP if you had one. Having a flood loss can also eliminate most of the private flood insurance options as most will not insure a property that has had a loss. However when the second loss and paid claim occur is when disaster can strike. This can turn a property into a severity loss property which has to follow certain mitigation guidelines in order to get insurance through the National Flood Insurance Program and private flood insurance is not available on these type of properties. This is why you should really review things closely before filing a flood insurance claim.

Have questions about flood insurance? Click the link below or visit The Flood Insurance Guru Find My Flood Risk & Flood Rate

 

pelham al home buyers beware

Hello, Chris Greene, with the Flood Insurance Guru here, where we have an educational background in emergency management with a specialization in hazard and flood mitigation. So we can help you understand your flood insurance options, how to minimize your flood risk, and possibly even how to get your flood zones changed. Today we're going to be talking about the major impact that the new flood insurance rates to the National Flood Insurance Program are going to have in areas like Pelham, Alabaster, and Helena Alabama.
Effective January 1st, 2019 the National Flood Insurance Program has put in some rate increases. Today we're going to talk about those rate increases when it comes to residential properties, investment properties, secondary properties, lake properties, second homes, commercial properties, properties that have been newly mapped to a new high-risk zone, and preferred policies.
So the first thing we're going to talk about is a primary residence. This is going to be your primary home. Let's say you have a policy now through the National Flood Insurance Program. It costs you $1,000 a year. You're looking at a 7.2% rate increase this year, effective January 1st, 2019, which is going to have an impact on you of about $72 a year, which isn't too bad. The big impact is going to be in areas like secondary residences, and commercial properties like we've mentioned. These areas are having a 24.2% rate increase. So let's say that you have a rental house that you're renting out, and it can't be considered your primary residence. If your flood premium is $2,000 a year then you are looking at almost a $500 rate increase per year, and that's just this year. So this could have a big impact on the profitability for a rental house.
Some other areas. Let's say you have a commercial business that has to have flood insurance and your flood premiums are $2,000 a year, you're looking at almost a $500 per year rate increase, for this year. The good thing is on other things like your preferred policies or zone X It's only having a 1%. So on a $1,000 premium, you're literally talking about a dollar and that's it, which is great news for these areas.
Remember, minimal risk areas or zone X generally have flooding 30% of the time. So just because you're in that low-risk zone doesn't mean you don't need flood insurance. It just means that FEMA has not determined it to be a high-risk area, and has not determined the base flood elevation. Other areas where you're going to see a rate increase are what's called newly mapped areas.
So let's say that a property is mapped to a flood zone AE, which is a hundred-year flood zone out from a flood zone X. Of course, during the first 12 months, you can take advantage of new mapping rules, which basically give you that preferred policy rate for the first 12 months. Well, you're going to see a 15% rate increase on those policies now. Now also remember that rate is only good for the first year, and that is there to help you adjust to what your flood premium's going to be. So it's very important that you look at these things.
It's also important that you understand the private flood insurance options and all your flood insurance options overall in Pelham, Alabaster, Helena, Alabama all these different areas where you're going to start seeing a lot of these flood rate changes. 

 

Remember we simplify flood insurance and understanding flood risks through education. If you want to learn more about flood education please visit our learning center by clicking below.

 

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In this article, we want to talk about escrow billing nightmares from both the National Flood Insurance Program (NFIP) and the Private Flood Insurance Program. We discuss what you need to know about escrow billing flood insurance. We discuss how flood insurance claims might be covered if payment has not been received.

Flood Insurance: Escrow Billing Nightmares

We want to focus on everything that you should know to ask as a mortgage lender, an insurance agent, and as a property owner.

You could also listen to our podcast below while you read.

 

Everything NFIP

The insurance company that falls under that federal side of flood insurance is managed by the Federal Emergency Management Agency (FEMA) and the National Flood Insurance Program (NFIP).

As you know by now, even with the Risk Rating 2.0 update, you will still find about a maximum of $250,000 for building coverage and $100,000 in contents coverage for flood loss with the NFIP and FEMA. For commercial properties, the building coverage maxes out at $500,000.

Flood Insurance: Escrow Billing Nightmares

Paying with Mortgage

It's important to point out a few things you need to know when getting your federal flood policy signed especially if you're paying it out of a mortgage loan or escrow payment.

One of these things is that you won't really be getting a declarations page or the actual policy with the National Flood Insurance Program right away. As a result, the signed application can serve as your proof of coverage for up to 29 days.

What does this mean?

Simply put, your mortgage company has 29 days to make a payment for your flood policy's insurance premium before the 30-day wait period kicks in. Think of this as a form of grace period for your mortgage company to pay your flood insurance premiums.

Flood Insurance: Escrow Billing Nightmares

REMINDER: The 29 days will only be for the payment of the policy. There will still be a 30-day waiting period for the actual flood insurance policy to be available.

What if you missed this grace period for your mortgage company to pay your flood insurance?

Well, because of the NFIP's strict guidelines, coverage would not start for 30 days. You might get set back when it comes to both your building and personal property coverage if this payment wasn't made in time because once payment is received after the 30th day is when the 30-day waiting period starts.

Paying Directly as an Agent or Insured

Now, when paying as an insurance agent or maybe you want to pay it out of your own pocket as a property owner, you will only get a 10-day period to pay your policy. The same thing goes, if you miss this 10-day period, your coverage will not start for 30 days.

Flood Insurance: Escrow Billing Nightmares

What If a Claim Occurs?

Let's keep it simple, so long as you made your payment before a claim occurs, you will get the respective coverage written in your flood insurance policy.

Equally, this means that if your mortgage company missed the 29-day payment period, then you will not get any of the coverage you have with your policy until the payment is made.

It is only AFTER payment is made will you be able to get coverage for your flood insurance claims.

Flood Insurance: Escrow Billing Nightmares

Everything Private Flood

So you might be wondering, what about the private flood insurance carriers? Where do they stand on this topic?

Well, it's important to note that just like their flood insurance coverage, payment terms when it comes to escrow billing or escrow account may vary from one private insurance company to another.

This may mean that you will be able to get only 10 days to make a payment up to 15 days. This is regardless if you're paying through a mortgage, an insurance agent, or out of your pocket.

Again, this really depends on the private insurance carrier that you applied with, so it's important to really know the guidelines that your private flood carrier has when it comes to these types of concerns.

Flood Insurance: Escrow Billing Nightmares

What if a Claim Occurs?

Private flood insurance has different standards and guidelines when it comes to payment and flood policies. So you might be shocked to know that some private flood insurance companies will outright reject or deny a claim if it's made before payment is made.

Yes, that means that you won't get any of the coverage with your policy if there was no payment before the flood claim was filed. This is why we highly recommend that you pay your flood insurance premium upfront, as hard as it may be, to avoid this type of situation.

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As an insurance agent, it's important to know which carrier has these guidelines or simply know the guidelines of the carrier that your client is going for. This really helps you, as an agent, avoid E&O Claims since you get to inform your client everything about their flood insurance carrier.

Flood Insurance: Escrow Billing Nightmares

In our experience, we've had many clients file flood claims two weeks and even two days after closing. Thankfully, they get coverage for the flood loss because they were able to get the payment made before these claims.

If you want to know more about the differences between the NFIP and Private Flood Insurance, watch our video below:

So if you need assistance with these payment guidelines for your flood insurance, so you can make sure that you have coverage on your property, understand flood risks, or anything about flood insurance, click below to reach us.

The Flood Insurance Guru | 2054514294

We want to simplify flood insurance, so you can get a better understanding of flood risk, flood insurance, and mitigating your property long-term through education.

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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.

What is NFIP's 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.

What is NFIP's Write-Your-Own Program?

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.

What is NFIP's Write-Your-Own Program?

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.

What is NFIP's Write-Your-Own 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.

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