The National Flood Insurance Program (NFIP) continues to experience challenges, increasing interest in flood insurance alternatives. We often receive calls and questions from clients asking for help in making sense of why the NFIP seems to be less predictable these days. To illustrate, let’s sum up the most recent provocations.
- Flood Map Changes: FEMA is revising flood maps for many areas. As a result, certain homes have moved into or out of flood zones. Some owners are no longer required to carry flood insurance by their mortgage lender. Others who did not need flood insurance are now required to carry it. The best tool for easily checking a property’s flood zone is FEMA’s Flood Mapping Tool.
- Mandatory Rate Increases: The NFIP was hit hard by hurricane Katrina when claims vastly outgrew the program’s cash reserves. In other words, the program went into debt because it had to pay out so much. Hurricane Sandy smacked it a few years later. Then came Hurricane Harvey in Texas and Irma in Florida, both in 2017. The NFIP is now financially underwater. Rates have been artificially low for many years and our taxes have filled the gap. Rates must increase. FEMA recently required rate increases of an average of 6.3% per year until no longer subsidized. Depending upon the property, increases can be much higher.
- Lapse of the NFIP: Periodically Congress must review and reauthorize the NFIP. The NFIP lapsed from January 20th through January 22nd, and is currently only authorized to continue until February 8th, 2018. Though we have no reason to believe it will not be reauthorized, we also cannot declare with certainty it will be.
Flood Insurance Alternatives
As a result of these issues, our office is flooded (apologies for the continued shameless puns) with requests for flood insurance quotes. The NFIP is a great option, but not the best for every client. Bankers Insurance has several flood insurance alternatives from regular insurance companies. Since NFIP flood insurance rates are rising, these alternative flood insurance programs are increasingly competitive, sometimes even 20% or more less.
Since now there exists several flood insurance alternatives, clients need to consider which is best in their situation. Just like home or auto insurance, it is wise to be aware of market changes and shop for pricing. With the recent floods, rates are being adjusted even with these alternative flood insurance programs. However, competition keeps rates as low as possible.
Please contact us if you have questions regarding flood insurance alternatives. Many common inquiries are addressed on our flood insurance webpage. There, you can also request a flood insurance quote.