Essential Flood Insurance Facts Every Insurance Agent Should Master
March 30, 2023
Author: Deena Gallo

As an insurance agent, it's essential to have a clear understanding of flood insurance. Floods are among the most common and devastating natural disasters, causing billions of dollars in damages every year. According to the Federal Emergency Management Agency (FEMA), over the last five years, the average flood insurance claim was approximately $42,000. Here are some essential things you need to know about flood insurance to provide your clients with the best service possible.

Flood Insurance is Not Covered by Homeowner's Insurance

One of the most important things to know about flood insurance is that it is not covered by a standard homeowner's insurance policy. Flood damage is considered a separate peril, and homeowners must purchase a separate policy to protect their homes and personal property from flood damage. As an insurance agent, it's critical to advise your clients on this matter to ensure that they are adequately protected.

Flood Insurance is Required for Some Properties

Flood insurance may be mandatory for homeowners in areas designated as high-risk flood zones. The National Flood Insurance Program (NFIP) requires homeowners in high-risk flood zones to purchase flood insurance to obtain a federally backed mortgage. Even if a homeowner's mortgage is paid off, if their property is located in a high-risk flood zone, flood insurance may still be required.

Flood Insurance Covers More Than Just Property Damage

Flood insurance policies cover more than just property damage. They also cover damage to personal property, including furniture, appliances, and clothing. This is an essential fact that agents need to communicate to their clients to ensure they have comprehensive protection.

Flood Insurance Premiums Vary by Location

Flood insurance premiums vary based on the location of the property. The risk of flooding determines the cost of flood insurance. Properties located in high-risk flood zones will pay more for flood insurance than those in low-to-moderate risk zones. As an insurance agent, you need to help your clients understand the risk and cost associated with their location.

Private Flood Insurance is Available

In addition to the NFIP, there are private insurers that offer flood insurance policies. Private policies may offer broader coverage options than the NFIP, and more times than not, they are more affordable, too. Agents should consider private flood insurance options to offer their clients the best protection and value.

Flood Insurance Has a Waiting Period

Flood insurance policies typically have a waiting period before they become effective, and this can vary depending on the insurance company. The waiting period is the amount of time between the policy's effective date and the time when coverage begins. During the waiting period, if a flood occurs, the policyholder will not be covered for any damages or losses. Here are the different types of waiting periods that different flood insurance companies may have:

Standard Waiting Period

The standard waiting period for most flood insurance policies is 30 days. This means that the policyholder will need to wait for 30 days after the policy's effective date before the coverage starts. This waiting period applies to both the National Flood Insurance Program (NFIP) and private flood insurance policies.

Modified Waiting Period

Some insurance companies offer a modified waiting period, which reduces the waiting time before coverage begins. For example, an insurance company may offer a 14-day waiting period instead of the standard 30-day waiting period. However, a modified waiting period usually comes with a higher premium.

No Waiting Period

In some cases, insurance companies may offer flood insurance policies with no waiting period. This means that coverage begins immediately after the policy is issued. However, these policies may have higher premiums than those with a waiting period.

Longer Waiting Period

Some insurance companies may offer a longer waiting period, such as 60 or 90 days. A longer waiting period may reduce the policy's premium but also means that the policyholder will need to wait longer before being covered for flood damages.

It's important to note that the waiting period is not designed to discourage policyholders from buying flood insurance or to save insurance companies money. The waiting period exists because flood insurance is designed to be a preventative measure against future flood damage, and coverage cannot be retroactive. Insurance companies need time to ensure that policies are in effect before a flood occurs.

It's essential to understand the waiting period for different flood insurance policies to advise your clients on the best coverage for their needs. It's also essential to advise your clients to purchase flood insurance well in advance of potential flood events to ensure they are adequately protected

As an insurance agent, you have a responsibility to protect your clients from the financial devastation that floods can bring. Understanding the intricacies of flood insurance, including coverage options, premiums, and waiting periods, is crucial to providing the best service possible. By communicating the importance of flood insurance to your clients, you can help them make informed decisions about their coverage needs and protect what matters most to them. Remember, when it comes to floods, the question isn't if they will happen, but when they will happen. By being a knowledgeable and trusted advisor, you can make a real difference in the lives of your clients when it matters most.