- Typical homeowner insurance policies don't cover floods.
- Homeowners need to ensure they have proper flood coverage, as certain situations aren't covered by all insurance plans.
- New NFIP flood insurance premiums took effect on April 1.
As of Tuesday afternoon, at least 1,000 homes had flooded in Harris County and six fatalities were reported in one of the most devastating natural disasters in the area. While it’s certainly a time to reflect on one’s own safety and the safety of their loved ones, it’s also important to know how to protect your clients in a similar event in the future.
Because Houston homeowners’ insurance policies typically do not cover floods those not required to obtain flood insurance may be in a stressful situation, wishing they would have obtained coverage.
Oftentimes, real estate agents can play a vital roll in a homeowner’s decision to obtain flood insurance — even if they live within a low-risk zone.
It is recommended by numerous outlets that all agents encourage homeowners or recent homebuyers to obtain flood insurance via the National Flood Insurance Program (NFIP), a federal program that allows flood coverage to be purchased through a number of insurance companies.
Homeowners can access their home’s flood risk by assessing the Federal Emergency Management Agency’s (FEMA) flood maps.
Breaking down flood insurance
When obtaining coverage through an insurance company, a real estate agent can alert clients of mitigation techniques that will lower their rates. These tactics include home elevation, grants, loans and various policy benefits.
If a community participates in the Community Rating System (CRS), homeowners may qualify for an insurance premium discount depending on the level of risk within their community.
Agents can also ensure a homeowner obtain the proper coverage, as some situations that cause flooding, a sewer backup, are only covered by flood insurance if they’re a direct result of flooding. The resulting damage is not coverage if the backup was caused by another problem.
For homeowners looking to sell, having existing, transferable flood insurance can make a home more marketable. It is also recommended that a seller obtain an elevation certificate that will detail to a potential seller the full risk of the home. In short, it’s important for a seller to disclose all potential flood risk upfront.
Unfortunately, homeowners seeking new flood insurance must wait for 30 days from the date of the purchase before a policy goes into effect. However, if flood insurance is purchased in connection with making, increasing, extending or renewing a loan, there is no waiting period.
As of April 1, 2016, NFIP premium rates rose an average of 9 percent, with some individual property owners seeing a rate increase up to 18 percent for newer properties and 25 percent for older ones.
According to the National Association of Realtors, FEMA will begin requiring insurance companies to re-underwrite NFIP policies in order to determine if the underlying properties are being rated based on the most current flood map.