This article by Patty Templeton-Jones, president of Wright Flood, appeared in PropertyCasualty360.
Policyholders have filed more than 44,000 flood insurance claims with the National Flood Insurance Program (NFIP) after Hurricane Ian. The federal flood insurance program has already paid nearly $437 million to policyholders as of early November 2022.
That’s just a small portion of the flood losses it expects to pay as a result of that storm, estimated by FEMA to ultimately range from $3.5 billion-$5.3 billion.
Here are five myths about the National Flood Insurance Program. It can be helpful to independent agents for reminding consumers and business property owners about flood insurance protection.
Myth 1: Flood insurance is available only to homeowners.
Flood insurance through the NFIP is available to homeowners, renters and condominium owners, as well as owners of business property in communities that participate in the program.
A flood insurance coverage limit of $250,000 applies to single-family residential buildings. The same limit applies per unit for residential condominiums. Contents coverage, which can be purchased separately, has a limit of $100,000 on residential buildings and is also available to renters.
Flood insurance can cover commercial structures up to $500,000 for the building and $500,000 for contents. (Insurance limits may not exceed the insurable value of a property.)
Myth 2: Flood insurance doesn’t cover hurricanes.
Flooding, whatever its cause, is covered by flood insurance, subject to the NFIP definition of a flood: “A general and temporary condition during which the surface of normally dry land is partially or completely inundated.”
Two acres or more, or two properties in an area, must be affected. According to the NFIP’s publication, Myths and Facts about the National Flood Insurance Program, flooding can be caused by:
- Overflow of inland or tidal waters.
- Unusual and rapid accumulation or runoff of surface waters from any source, including heavy rainfall.
- Collapse or subsidence of land along the shore of a lake or other body of water, due to erosion or the effect of waves, or water currents exceeding normal, cyclical levels.
- Mudflow (a river of liquid and flowing mud on the surfaces of normally dry land areas).
Myth 3: Federal government disaster assistance will pay for flood damage so flood insurance isn’t necessary.
Federal disaster assistance does provide funds to some affected by floods, but federal assistance is available only after a geographic area has been declared a federal disaster. The federal government issues disaster assistance declarations in fewer than 50% of flooding events.
Those who do not have flood insurance and receive federal disaster assistance after a flood are required to buy it to be eligible for future disaster relief.
Myth 4: Property owners and renters can’t buy flood insurance just before a flood or while one is occurring.
Consumers and business property owners can buy purchase NFIP coverage at any time. Typically, however, there’s a 30-day waiting period after the first policy premium is paid before the coverage goes into effect.
There are exceptions to the waiting period, as noted by the NFIP:
- No waiting period applies if the initial purchase of flood insurance is connected with a property loan. Flood coverage becomes effective at time of the loan (so long as policy application and payment of insurance premium have been made at time of loan closing or prior to closing).
- There is a one-day waiting period if flood insurance is initially purchased during the 13-month period after revision of a community’s flood map. This stipulation applies only when the Flood Insurance Rate Map is revised so that the building is placed in a special flood hazard area when it had not been previously.
Any NFIP policy cannot cover a loss that is in progress (defined by NFIP as a flood loss occurring as of 12:01 a.m. on the policy term’s first day). Policyholders also cannot increase flood coverage during a loss in progress.
Myth 5: If a property has been flooded in the past, it’s no longer eligible for flood insurance.
A home, apartment or business that’s been flooded is still eligible for flood insurance under NFIP guidelines, provided the community in which it sits participates in the program.
The National Flood Insurance Program was created in 1968 to provide federally backed flood insurance to property owners, since flood insurance was then not widely available from the insurance industry. Today, some insurance providers do provide private flood insurance coverage.
Patty Templeton-Jones is president and chief program advocate of Wright National Flood Insurance Services, which offers primary and excess flood products nationally through the National Flood Insurance Program as well as through Wright’s ResiFlood residential private flood insurance. She can be reached at firstname.lastname@example.org.
Opinions expressed here are the author’s own.