The Flood Insurance Guru Blog
Today, we're talking about what happens when flood insurance isn't enough? What happens if you don't have the right coverage? if there's a gap between the amount that your loan is for and the amount maybe the National Flood Insurance program offers? We're going to talk about some resources when it comes to assistance. Who's responsible in these different types of situations?
So today, first of all, we want to talk about the National Flood Insurance Program. The coverages that this program offers are 250,000 for your residential dwelling, that's the max you can get through them, and 100,000 for contents. Then you have what's called, Excess Flood, which you can use on top of this to go above and beyond. Then you also have what's called, Private Market, which you can pretty much take in up to $10 million, if you wanted to.
If you have a $400,000 to $500,000 house you really want coverage for that amount. Let's just say, even though your bank only requires $250,000 and your property is a total loss. You could be on the hook for another $150,000 to $250,000. When you're meeting with an insurance agent to get your flood quotes, you want to make sure that they understand this. You want to make sure they have access to the National Flood Insurance Program, to private flood, and to excess flood. The Nashville Flood of 2010 started to show some major gaps in what insurance agents where offering their clients. Many agents were just offering the normal $250,000 by the NFIP, few were offering excess flood, and even fewer were offering private flood. When getting flood insurance in Pelham Alabama, Nashville Tennessee, Huntsville Al, Memphis Tennessee, Atlanta Georgia, Phoenix Arizona and even areas like Toledo Ohio these are questions you want to ask.
In some of these areas that have consistent problems, when it comes to flooding, you want to make sure you have all the options out there. The last thing you want to happen is that if something does happen and you don't have enough coverage there. This can create a disaster situation like it did in Houston TX in 2017 where many are facing bankruptcy or foreclosure.
So the next question is who’s responsibility is it? Well first of all as insurance agents its our responsibility to properly educate consumers on the risks and what every option is. If we only offer one option for flood insurance then it as our responsibility to let the property owner know that so they can obtain the proper coverage. Once we have provided the property owner with every possible option it is up to them to decide how they want to protect their property. As in most things, preparation, in the form of documentation, is key. Plans and procedures should be instituted to document all coverages offered and declined and to track and follow up on any and all premium payments made. In the absence of documentation of these efforts, the proofs needed to defend a broker would likely devolve into a “he said, she said.” This can complicate a defense leaving the issue of credibility to a jury, which can tend to be predisposed to dislike insurers and those associated with insurers they decide to only insure for $250,000 instead of the $400,000 that the loan is for it is important that they understand what resources are out there to fill that gap.
Now, what we also want to talk about, what happens when flood insurance isn't enough? Are there resources out there? Yes, there are. FEMA's Disaster Assistance Program is available when disaster relief is going on in certain areas. Now, FEMA is not going to cover things that flood insurance would cover. Your flood insurance is going to have to cover that first, and if the flood insurance just doesn't get you back to where you need to be, then FEMA does have a process you can go through and request additional funds. For example, you might be able to get up to three months of additional living expenses with FEMA, even though it's not offered on flood insurance, if it's in a disaster relief area. You might be able to get certain things covered that flood insurance didn't cover. So there's a whole process you have to go through in submitting these things to FEMA to see if they'll approve them.
Now, if they were to deny you, you can still go through about a 60 to 90 day appeals process to see if you can get some of this funding. Disaster assistance is available in many of these situations, but what's important is that you understand, disaster assistance is not a grant program. Disaster assistance is, actually, a small loan program. What's happening is the disaster assistance program, especially, as I said, in areas, really, across the country that are taking on a lot of flooding right now. As we're mentioning, flood insurance in Nashville, Tennessee, flood insurance in Birmingham, Alabama, flood insurance in Huntsville, Alabama, flood insurance in Anniston, Alabama.
These can all be areas that are unfortunate, because of flooding. But, as I said, you really want to understand the difference between what FEMA is going to cover, with the National Flood Insurance Program and what private flood is going to cover and what's going to cover the gaps? Because, unfortunately, as the borrower of a loan, that responsibility is going to fall back on you. When you go to get these flood quotes, let your insurance agent know what your loan amount is. This way, if it's way over what the 250 requirement is, they can put the proper coverage in place for you. If they can’t reach out to someone like The Flood Insurance Guru.
If you've got questions exactly what coverage might be right, when it comes to flood? Do I need to cover my home for same thing on flood, as I do on homeowners? That's a big question that's always out there. How much flood insurance do I need? Do I have to have flood insurance? Then please reach out to us regarding that. Fill out the form to learn if you have gaps in your flood insurance.