In many cases, flood insurance is required for homeowners and businessowners. For any person with a mortgage through a federally-backed lender, flood insurance is required if the property is located in a high-risk flood area (Special Flood Hazard Area, or SFHA). Even if the property is outside a high-risk area, lenders can still require flood insurance for low- to moderate-risk areas (NSFHAs).
As agents, we must advise our clients of the dangers of not purchasing enough flood coverage, or not purchasing flood insurance at all. One in four claims handled by the NFIP comes from properties outside high-risk zones. Additionally, mortgage lenders may not require flood insurance equal to the value of the property. Thus, insurance agents need prepare clients of these coverage gaps that could cause financial catastrophe.
Climatic events such as hurricanes, snowmelt, heavy rainfall, and even non-climatic events such as plumbing & sewer failures can all cause serious flooding. Here are recent events that caused significant financial loss to American communities:
• 1989: Hurricane Hugo resulted in $375 million in NFIP claims damage
• 2005: Hurricane Katrina resulted in $17 billion in NFIP claims damage in just 1 year.
• 2012: Hurricane Sandy caused more than $8 billion in NFIP claims damage.
• 2017: Hurricanes Harvey, Irma, & Maria cause more than $6.3 billion in NFIP claims damage.
Source: 50 Years of the NFIP
In April 2021, FEMA updated the NFIP's pricing structure to "Risk Rating 2.0". This approach uses cutting-edge flood mapping technology to deliver appropriate premium rates for a given property. This recent change has helped make flood insurance more equitable, ensuring the cost of coverage is approrpiate for an insured's property.
