Types of Flood Insurance
Flood insurance is unique from other types in how it’s sold and purchased. There are three types of flood insurance, two types (WYO and Government) use the federal government’s National Flood Insurance Program (NFIP) for coverage. The difference is in how the policies are obtained and written, while private is an alternative to coverage through the government.
Government Flood Insurance
Just like health insurance, you can visit a government website to purchase coverage. In this case it’s floodsmart.gov; add your zip code or view the map to see the risk zone of your property. From there, you can purchase directly from the government or a licensed agent.
The government offers insurance for floods through the National Flood Insurance Program. In health insurance, subsidized healthcare is through the government if your income is below a predetermined amount. To receive subsidized flood insurance, you would need to be located in a high-risk flood zone.
The reason for the Federal Government underwriting losses in the first place, is similar to health insurance. It makes it more affordable and allows for better prevention of flood losses by working directly with communities.
Write Your Own Flood Insurance
Although the Federal Government is responsible for underwriting losses, in 1983 they allowed for insurance carriers to resell flood insurance, the same flood insurance provided by the Federal Government. However, there are benefits to going through an insurance company vs. the government for the same policy.
- Superior Customer Service
- Expertise of agents that understand flood insurance
- Potential discounts from combining umbrella, flood and homeowners policies from the same carrier
– Free flood maps and risk assessments
For this reason, Hettler Insurance Agency uses the American Bankers Insurance Company, which is a write your own flood insurance company.
Private Flood Insurance
Like health insurance, there are options for private flood insurance and there are several benefits to private flood insurance vs. the government’s National Flood Insurance Program (NFIP).
In 2013, drastic hikes to NFIP rates took affect for many policy holders in high risk zones. As of 2014, the NFIP is in debt of $24 Billion, after Hurricane Katrina and Superstorm Sandy drained the program. Policy holders did experience premium hikes in the months following these disasters, although last year, President Obama did sign legislation to make government flood insurance more stable.
Higher premiums are often cited as a reason not to get private flood insurance, but in recent years, these premiums are comparable to the federal program, it truly depends on where you are located. As of 2015, there were only a handful of private flood insurance options available to Texans. Lloyd’s of London, one of the largest insurance carriers in the world underwrites flood insurance through The Flood Insurance Agency, a Florida based company.
However, consult with your insurance agent before considering flood insurance through private or government programs. Federally backed mortgages often require NFIP flood insurance, not allowing for private flood insurance policies.