In an ideal world, your home insurance would cover all risks, including flooding.
But in this world, flood damage is excluded from most policies unless you've bought a rider, endorsement or separate policy. UP is among the many stakeholders that are working to improve consumer options for buying flood insurance. The National Flood Insurance Program has the biggest share of the flood insurance marketplace in part because they will insure properties that private flood insurance companies won't. Your options for buying flood insurance depend on where your home is located and a number of other factors.
Banks require borrowers in flood-prone areas to carry flood insurance, but other than that, most people who aren't required to buy it...don't. The vast majority of people in the US aren't insured for flood damage, and the pool of people who buy it are mostly in high risk areas. That means flood risk isn't being spread widely enough to make it affordable, so the federal government has to subsidize the pricing for those who have to buy it.
The National Flood Insurance Program, reform and reauthorization:
Through UP's Roadmap to Preparedness and Recovery programs and our work with insurance regulators at the National Association of Insurance Commissioners, we have been actively involved in advocating for reforms and improvements to the program. A creature of Congress, it was set to expire in September of 2017. Since that time Congress has reauthorized the program as is with no reforms through a series of short-term reauthorizations, so reform work is ongoing. UP has been providing substantive input to lawmakers and to NFIP management, working with stakeholders, and engaging with insurance industry representatives to find common ground. FEMA has implemented some reforms on it's own.
Many of UP's proposed principles and language are included in discussion drafts issued by Senators Cassidy (R-LA) and Gillibrand (D-NY), Congressman Sean Duffy (R-WI), and Senator Menendez (D-NJ). John Kennedy (R-LA), Chris Van Hollen (D-MD), Marco Rubio (R-FL), Elizabeth Warren (D-MA), Thad Cochran (R-MS), Cory Booker (D-NJ) and Bill Nelson (R-FL); and Senators Mike Crapo (R-ID) and Sherrod Brown (D-OH).
Here is an overview of the bills that are currently working their way through Congress. Here is a comparison of the main House proposal and UP's reauthorization principles. Here is a letter from House members to House leadership expressing concerns about the current package of House proposals. On August 10, 2017, UP submitted a letter to the Senate on behalf of a coalition of advocates regarding the leading Senate bill. On January 18, 2018, UP prepared a letter to key members of the Senate Banking Committee urging that NFIP legislation be advanced to the Senate floor, rather than voting to reauthorize the program without change as part of a continuing resolution.
In addition to communicating with Congressional offices and stakeholders, UP is assisting FEMA on improving the NFIP's claims handling for Hurricanes Harvey and Irma and future events.
What should a consumer do related to flood protection?
Buy it if you can afford it, even if your property is outside an officially mapped flood risk zone. Flood mapping is a work in progress, and water doesn't stop at zone boundaries.. Most of the communities that were devastated by flooding in South Carolina in 2015 and Baton Rouge in 2016 weren't mapped as flood zones so the residents hadn't bought insurance. Many Hurricane Harvey victims face the same problem. Consider the conditions around your home, get at least two quotes from a reputable insurance agent for adding flood coverage to your home or renters policy. Get a quote from the hybrid public/private National Flood Insurance Program, and at least one from a private insurance company. Even if you don't live in Florida, this list will make it easy to shop for a private flood policy.
Most people only have two choices for buying flood insurance: 1) The National Flood Insurance Program (NFIP), or 2) A "surplus lines" insurance company affiliated with Lloyds of London.
The NFIP was created by Congress after private insurance companies en masse stopped covering flood damage in the 1960's. It is a public/private partnership under FEMA that is largely controlled by private companies that contract with the government to provide services to the program. Surplus lines/Lloyds companies also sell flood insurance. Their policies provide similar, and sometimes better coverage than you get through the NFIP, but unlike the NFIP - the federal government doesn't subsidize their rates, so they tend to cost more than an NFIP policy. Surplus lines companies, also called "non admitted" insurance companies, don't have to fully comply with state regulations. A third option is the all-risk policies sold to owners of high value properties that don't exclude flood damage.
A large deficit and a scandal related to altered structural engineering reports on homes damaged by the 2012 Superstorm Sandy have brought the NFIP under intense scrutiny. The program will come up for Congressional reauthorization in 2017. In addition to concerns over the programs finances and claim handling practices, there are ongoing debates about whether flood insurance should be affordable or even available in coastal areas due to the realities of climate change and hurricane risk. Insurance companies, public officials and agencies, environmental advocates and property owners all are vocal stakeholders in these debates. United Policyholders recognizes and respects the conflicting considerations around flood insurance, but remains committed to helping existing homeowners in flood zones protect their assets through the purchase of flood insurance.
In addition to championing a marketplace where flood insurance is available and affordable through private insurance companies and the National Flood Insurance program, we support greater transparency and fairness in the flood claim adjusting process and access to justice for policyholders who get mistreated by insurers and/or adjusters..
For more information about our work for and with flood survivors in various states, visit our Roadmap to Recovery Program section and specific disaster blogs. For more information about our work related to climate change and insurance, visit our Climate Change and Insurance Guide.
For more, see UP's Executive Director Amy Bach's presentations to the NAIC on flood insurance availability and affordability.
UP is working through all three of our programs toward the following goals:
- Affordable, available insurance for existing homes in flood zones
- Realistic options for property owners who can't afford mandated flood insurance
- Flood coverage for dwellings and contents without surprises and major gaps in protection
- Realistic policy deadlines, fair claim handling and appeal and dispute resolution rules and processes
- A restructured National Flood Insurance Program that is well run, efficient and that deserves public trust
- Insurance company approaches to climate change that are measured and constructive