The National Flood Insurance Program makes flood insurance available to homeowners.
Mortgage lenders require many homeowners to purchase the flood coverage. Even if you are not required to purchase flood coverage, it still is worth talking to your local, independent insurance agent about covering your property against flood. Here are some key facts to keep in mind:
- No homeowners policy covers damage that results from flood—you always will need a separate policy.
- Premiums are based on the risk of flood—the lower the risk, the lower the premium.
- Many insurance companies write NFIP policies that work in conjunction with your homeowners insurance policy, and reduce the risk of a gap in coverage.
- According to the Federal Emergency Management Agency, 40% of all NFIP claims from 2015-2019 came from outside high-risk flood areas.
- The NFIP pays flood claims regardless of state disaster declarations.
While the NFIP makes flood insurance widely available to homeowners across the country, it does have some important limitations to consider before a flood happens:
- The maximum coverage for a residential structure is $250,000, with an additional $100,000, for contents.
- Coverage does not extend to contents in a basement, which is defined as any part of the building below grade on all four sides.
- Condominium policies have specific limits and considerations.
- Coverage may not take effect immediately—you must purchase flood coverage before a hurricane, tropical storm or flood happens. Typically, there is a 30-day waiting period for flood insurance to take effect.
Even if you already have an NFIP policy, there are changes to the methodology to set premiums—which go into effect Friday, Oct. 1, 2021—that likely will impact your policy when you renew it:
- Each house will be rated individually, allowing the premium to reflect the flood risk to the actual structure.
- While some premiums may go down, others may increase to reflect the risk. Federal law still will cap premium increases and maximums.
- The actuarial sound rate on your declaration page will not necessarily reflect your premium—you need to pay only the premium. Premium increases have an annual limit of 18% for primary homeowners.
- The methodology does not change the maps dictating who must purchase NFIP or similar flood insurance coverage.
- The new methodology will impact all new policies starting on Friday, Oct. 1, 2021, and all renewal policies starting on April 1, 2022.
The NFIP makes it feasible for every homeowner in the country to obtain flood insurance from a reliable company (backed by the federal government), but it may not be the best option for every home.
To discuss your flood insurance options and how you can best protect your home if a flood hits your community, give us a call or visit our office today.