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National Flood Insurance Program Reforms Could Create Private Insurance Opportunities

The topic of flood insurance is a highly debated one. Right now, standard homeowners insurance policies exclude flood coverage, meaning that homeowners must find it from another source, namely the National Flood Insurance Program (NFIP) or a private insurer who can underwrite such a policy. For homeowners who live in a high-risk zone, it’s a requirement. For others, taking out a policy is a choice based on their locational risks.

Protecting your home starts with homeowners insurance, and you can get a free quote from CoverHound to help you evaluate your options. But, depending on your living situation, you may need something extra. That’s why it’s important to stay informed on possible changes to the NFIP program coming up in the near future.

Just like U.S. weather patterns, the NFIP is in a state of flux. Set to expire on Sept. 30, 2017 unless Congress renews it, this program “aims to reduce the impact of flooding on private and public structures” by “providing affordable insurance to property owners and by encouraging communities to adopt and enforce floodplain management regulations.”

However, the NFIP was approximately over $24 billion in debt before flooding due to Hurricanes Harvey and Irma began—due in no small part to paying out claims related to Hurricane Katrina (2005), Superstorm Sandy (2012) and various flooding in 2016. As of now, it would not be possible for the NFIP to pay the U.S. Treasury back its debts.

As U.S. News & World Report outlines, U.S. lawmakers are currently considering legislative reform for the NFIP, including:

− Updating U.S. government flood zone maps

− Increasing coverage available through private insurers

− Limiting/excluding coverage for higher risk properties

For years, private insurers would not or could not touch flood insurance due to a combination of factors: they could not compete with NFIP’s subsidized premiums and they did not yet possess the underwriting tools to accurately assess flooding risk. But Katrina meant the NFIP had to raise premiums, so they are now more on par with what private insurers could feasibly charge, according to the Insurance Journal. Coupled with the fact that insurers now have access to “new and evolving catastrophe models” to measure flood risk, this means that we may be seeing an uptick in private insurers offering flood coverage.

As of now, flood insurance often comes with a prohibitive cost, which explains why 80 percent of homeowners in the area affected by Hurricane Harvey did not have coverage. The average NFIP in Texas is around $500 annually, but in high-risk floodplains, the figure can climb upwards of $2,000 per year.

These coming months will be pivotal for how the U.S. will handle flood coverage moving forward. One thing is certain: homeowners should understand their homeowners insurance policies so they which events are covered and which are not. They should also understand locational and geographical risks so they can take action before disaster strikes.

Looking to enroll in homeowners insurance (for protection against perils like wind, fire, lightning and more) or update your policy? CoverHound is here to help. Explore policy options today!



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