Flood Insurance For Texans Basics
Let Insurance For Texans show you how to navigate the waters of Flood Insurance!
Have you found the PERFECT Home? Did your lender tell you have to get flood insurance?
- Did you know that every home is assigned to a flood zone in the US?
- Lenders do not require all homes to carry flood insurance. Only those deemed high risk.
- Approximately 4% of homes in the US are covered by Flood insurance.
- Not sure what your options are for obtaining flood insurance?
- Can you get flood insurance if your lender doesn't require it?
Insurance for Texans has helped families all over this great state find the right coverage for their needs. We work with lenders, realtors, and surveyors to make sure that your home is properly protected.
If you are looking for the best coverage for flooding, let our experts guide you through the process of getting the right policy at the right price.
Give us some quick info below to get started, or read on below about Flood Insurance for Texans.
Is Coverage Required?
- All homes, buildings, and land is classified into a flood zone of some sort. That is surprising to some people as they don't think that they live in a flood zone. The reality is that they simply live in the lowest risk zone.
- That zone determination is administered by FEMA and the National Flood Insurance Program, through a complex map program.
- Zones are assigned letters which corresponds to the risk level of flooding due to elevation and water sources around it.
- Zone X, which accounts for the vast majority of property designations, is the least risky to flood. A less than 0.01% chance for flooding.
- Anything that is more risky than Zone X, can be required to carry flood insurance by a lender if you have a lien against the property.
- A home that does not have a lien against, cannot be required to have a flood insurance policy against it. That is your call.
- A Flood Insurance Policy is recommended for any owner of a home or building due to two unique factors in Texas even if it's not required.
- Flash Flooding is a real risk in Texas due to the soil composition and unique water run-off in many areas of the state. The rocky nature of dry creeks can create an almost instantaneous flow of unthinkable water with thunderstorms.
- The other risk factor is the continued development of urban areas in Texas. The application of concrete in these new developments are creating new drainage and water run-off issues that have never been seen since the water cannot seep into the ground. This has created flood situations that have never been experienced even in older homes.
Hurricane season runs from June to October, which is fairly lengthy. Texas has hundreds of miles of coast line along the Gulf of Mexico which means that many Texans in those coastal counties are at risk of flooding due to storm surge. Because of this, many of these coastal areas fall into the Special Hazard Zones which does require Flood Insurance. For those homes that are not in that Special Hazard Zones, there is still an increased risk of flooding. The flooding potential due to the development of land in these areas since the ability of the water to run-off has been impacted due to concrete. Therefore, it is important for these home and property owners to carry flood insurance.
Along with this, we have seen the hurricanes that have made landfall in recent years produce massive amounts of rain on the developed areas such as Houston. The bayou system that Houston has traditionally relied upon to funnel water out of the city bypassing homes has been affected by the development of the last 20 years. During the expansion of the city, places that have never flooded previously are seeing rising waters, not only from hurricanes but also large rain events. As a result, it is imperative that residents of these urban areas secure flood policies.
- Just like a homeowners insurance policy, a step in creating a quote is to determine how much money is required to rebuild your home in the event of a total loss. Dwelling coverage is the amount of money you will have available to rebuild your home.
- This number is going to be based on age of home, type of construction, neighborhood, finish quality, etc. The median amount in North Texas is approximately $240,000.
- For homes covered by the National Flood Insurance Program (NFIP), the maximum amount of coverage available on a single home is $250,000. A commercial property will have a maximum amount of $500,000 available. If you need more dwelling coverage than that, what do you do?
- Private Flood Insurance, which can satisfy lender requirements, can either help provide excess amounts against the dwelling coverage from your NFIP policy OR it can replace it altogether by covering your entire structure.
- Personal Property on your flood insurance policy is to provide a way to replace your household possessions and contents of your home in the event of claim. It can be as simple as a change of clothes all the way to the complex of electronics.
- Just as with the dwelling value, the NFIP has a maximum amount that they will cover at $100,000. Private flood policies can help make up that difference beyond that limit or replace it altogether.
- All insurance policies contain what is known as a deductible. Insurance is the transfer of risk of loss from the person or business to the insurance company. Deductibles are how those companies require the policy holder to have some skin in the game as the old phrase goes. The higher the deductible, the lower your cost of insurance. That's because you can't claim for small things.
- With Flood Insurance, the deductibles are generally in round dollar amounts. They usually start at $1,000 and can go all the way up to $25,000 or even $50,000.
- With most flood policies, you can have different deductible amounts for the dwelling and the personal property. It's possible to keep them the same, but you get to make that call.
National Flood Insurance Program Vs Private Coverage
- National Flood Insurance Program (NFIP)
- This is the program that is run by FEMA that will provide coverage to any home. They have very specific guidelines on what coverages are offered and how much of that coverage is available which we alluded to above.
- The NFIP policy only allows for two coverage line items.
- Dwelling - NFIP has a cap of $250,000 in coverage available to you for dwelling value.
- Personal Property - The maximum amount of coverage from NFIP is $100,000 for personal property.
- The premiums for this program do not vary from one company to another since the program is administered by the Federal Government. As a result, there is no benefit to shopping carriers the agents you talk to can only offer NFIP policies.
- Premiums are set on your specified flood zone, dwelling and personal property coverage amounts, and deductibles selected.
- Since this program is run by FEMA, it can be subject to political wranglings by folks on both sides of the aisle. The funding for the program falls to the Federal Government, and can be debated in an appropriations fight.
- Private Policy Coverage
- These policies are underwritten by many different companies just like other insurance. Not all insurance agents will be able to offer you these policies as some of them will not work with certain agents.
- If the property you are covering through a policy with the NFIP needs more coverage than the limits that they offer, you can use private flood insurance as a mechanism to secure the rest of the value needed beyond the $250,000 in dwelling value of $100,000 in personal property.
- Private Flood Policies can include different line items of coverage as well as larger amounts of it!
- Dwelling - The amount of coverage available is only limited by the insurance companies risk appetite. It can and will go above the $1,000,000 mark if needed. It can also extend above an NFIP policy as we mentioned above.
- Personal Property - Most homes will need more than the $100,000 maximum coverage available via the NFIP. Private Flood insurance will allow you to do that as well as provide excess to that NFIP policy.
- Loss of Use - One item that is on a standard home insurance policy, but not on an NFIP flood insurance policy is the loss of use. This coverage will provide your ability to have temporary housing while you are displaced for your home. This can become vitally important in a major catastrophe situation. This is a major advantage to the NFIP flood insurance policies.
- Since Private Flood Insurance is only limited by the insurance company's ability to craft policy coverage that you will purchase, they have the ability to add other coverage in as well if you are searching for something specific.
- Which Coverage Is Better For You?
- The answer to this question is likely to be very subjective, since needs for coverage value will determine a large portion of this. If your home is below the NFIP maximum values, that type of policy may work well.
- The Flood Policies administered by the NFIP are generally guaranteed to pay out in the event of a claim since it is backed by the United States Government. Private insurance companies can incur losses that put them completely out of business without proper reserves.
- One advantage that a Private Flood Insurance has lies in it's ability to adjust pricing based off of specific risk items. They are not beholden to the NFIP program pricing. As a result, it can be a mechanism to lower costs of coverage for higher risk zone homes.
- Since every home is placed into a flood zone classification, the homes that are in higher zones will typically pay more money for coverage. However, if your home has been built in such a way to reduce that risk, Private Flood Insurance companies will reduce the cost for coverage potentially.
- Having an elevation certificate will show your home's elevation compared to the neighborhood or zone baseline. A higher elevation of your ground floor indicates that is less likely to flood. That lowered risk can bring your premium down with a Private Flood Policy.
- The other advantage of a Private Flood Policy is the ability to adjust rates for coverage based on updated risk appetite and claims history for specific zip codes or neighborhoods.
- Homes in Dallas and Ft Worth that are in close proximity to the Trinity River are relatively protected by the levee system that is in place. The NFIP will still classify these homes as high risk and charge accordingly. Private flood insurance coverage has the ability to adjust due to this very specific information.
- Conversely, if the private flood insurance can shut down those same zip codes if they feel as if they have too much concentration of risk in those areas. It is a give and take situation.
- Working with an Independent Insurance Agent can allow you to evaluate options on both sides of the equation as they can work with both the NFIP and Private Flood Insurance companies.
As you can see, there is a lot to consider when shopping for the right Flood Insurance Policy. Speaking with an independent insurance agent allows you to explore options, where to place coverage, and customize a plan that fits your family and budget. Let Insurance For Texans do a review of your policy today and make sure that you are properly covered for a flood!