When most people think about flooding they normally think about areas like the coast. They don't think about inland areas like Birmingham Alabama, Huntsville Alabama, Hoover Alabama or even Montgomery Alabama. This is one reason why many times insurance agents, realtors, lenders, and property owners are not aware of the flood insurance options in Alabama.
In this blog we are going to particularly talk about private flood insurance in Alabama and everything you need to know about.
The majority of people in Alabama still think the only flood insurance option available in Alabama is through the National Flood Insurance Program.
However this simply is not the case. Private flood insurance and the National Flood Insurance Program are both available in Alabama. Private flood insurance has really made a push into Alabama in the last 10 years.
However before you start rushing to the private flood insurance market there are some things you need to know.
- Who qualifies?
- What does admitted and non admitted mean?
- What coverages are available?
- Claims process
So let's talk about who qualifies for private flood insurance in Alabama?
Almost any body can qualify for private flood insurance in Alabama except those that are on the severe repetitive loss property list.
This is a property FEMA has designated because of a certain number of flood losses within a certain time frame.
There are a few things that could disqualify you based on the private flood insurance company. For example some private flood insurance companies will not insure a property that has had any flood loss, then there are some that only restrict it within the last 5 years, and then there are some that restrict it to just none claim within the last 5 years.
Something else that could disqualify you for private flood insurance in Alabama is the type of loan you may have on a property?
FHA loans restrict flood insurance options to only the National flood insurance Program, so this is one thing that could disqualify you. While other loan types in Alabama do allow private flood insurance it still has to meet certain guidelines.
In order for banks to accept private flood insurance it has to meet the U.S.C 402C. which is the private flood insurance standard of being the same as the National Flood Insurance Program.
The reason for this is because it's a different type of program.
Private flood insurance in Alabama is broken into two different categories. You have non admitted and admitted.
So whats the difference?
Admitted insurance companies are companies that are licensed to do business in a state. They have to follow certain state laws and consumers have certain protections if the company goes out of business.
Non admitted insurance companies are not licensed in a state but are still allowed to do business there. They do not have to follow the same state laws but do have other guidelines they have to follow. Consumers do not have protection if these companies go out of business. Non admitted companies can also charge different fees that admitted companies can not.
It's important to know as of 2020 Alabama does not have any admitted carriers for private flood insurance.
So what coverages are available?
Private Flood Insurance Coverages
Well this is where private flood insurance in Alabama can be very beneficial. Private flood insurance offers unique coverages on commercial and residential flood insurance in Alabama.
Let's look at residential flood insurance first. The National Flood Insurance Program only offers up to $250,000 on buildings and $100,000 on contents. Private flood insurance can go up into the millions on building coverage. They also offer additional living expenses so if your property floods then you would have a temporary place to stay. This can be really important if repairs take 3-6 months.
Now let's look at the commercial coverages. The National Flood Insurance Program only offers building coverage up to $500,000. As you can imagine this would not go very far on a commercial building. Private flood insurance also offers coverages into the millions here. One major thing that the National Flood Insurance Program does not offer is business interruption coverage. This is a critical coverage for a commercial flood insurance policy.
Let's look at an example of where you would use this coverage. Let's say that you own apartment complexes in Birmingham Alabama. Its been an usually wet few months and the Cahaba river starts to overflow causing water to enter the apartments.
Well residents can't live in these apartments until the repairs have been done.
Let's say that 30 units are damaged and you rent them for $1000 a unit. If it takes 3 months to repair them then thats $90,000 you could be out of pocket. However a private flood insurance policy could cover this expense. As you can imagine this could send some business owners into bankruptcy.
Now that we have a good understanding on the differences in coverage lets discuss pricing.
We hear from people everyday in the Birmingham and Huntsville Alabama area that all flood insurance is the same. While this technically is the case for a National Flood Insurance Program policy. This is not the case for private flood insurance. Each flood carrier looks at risk differently. The two things that most are looking at are the elevations of the building and the location to flood risk in the area. FEMA is using their outdated flood maps and private flood insurance companies are using different technologies.
Because of this its not unusual for private flood insurance in Alabama to be 40% cheaper than the National Flood Insurance Program.
So what about claims?
Private Flood Insurance Claims
We can talk about all the other stuff all day long. However at the end what matters is when you have a claim you are covered and its a smooth process. FEMA claims can take 6 months to a year to settle if it is a smooth process. What about private flood insurance claims?
We had a client in Centre Alabama that suffered a total flood loss in 2019 from the flooding. While this customers neighbors were still battling with FEMA after 6 months he had is private flood insurance claim settled within 60 days. Since it was a total loss they paid off the mortgage.
We had the exact same thing happen with a client in Nebraska where they settled within 60 days and everyone else was waiting on FEMA.
So before jumping into the private flood insurance market in Alabama it's important to ask the questions we have discussed today. This will help you understand the type of company you are dealing with and confident that the claims process will go smoothly.