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  • James Robinson CFP

You Can’t Buy Flood Insurance...

You Can’t Buy Flood Insurance in the Eye of a Hurricane

Hurricane season comes every year and many homeowners experience the impact and effects of wind damage and flooding. The biggest misconception when it comes to flood risk is that some people are in a "flood zone" while others are not. Even lower-risk areas can experience a flood. Since standard homeowners insurance doesn't cover flooding, it's important to have protection from the floods associated with hurricanes, tropical storms, heavy rains and other conditions that impact the U.S. Yet according to a 2016 poll by the Insurance Information Institute found that 12 percent of American homeowners had a flood insurance policy, lower than the 14 percent who had the coverage in 2015. The percentage of homeowners with flood insurance was highest in the South, at 14 percent. Thirteen percent of homeowners in the Northeast had a flood insurance policy, 10 percent of homeowners in the West had a flood insurance policy, while 8 percent of homeowners in the Midwest had flood insurance.

Flood Facts You Will Want to Know

  • Floods and flash floods happen in all 50 states. Everyone lives in a flood zone.

  • Most homeowners insurance does not cover flood damage.

  • Just an inch of water can cause costly damage to your property.

  • Flash floods often bring walls of water 10 to 20 feet high.

  • A car can easily be carried away by just two feet of floodwater.

  • Coverage for flood damage resulting from surface water, including storm surge caused by hurricanes, is excluded under standard homeowners and renters insurance policies.

  • New land development can increase flood risk. Construction could change natural runoff paths.

  • If you live in a high-risk area, your home is more than twice likely to be damaged by flood than by fire.

  • If you live in a Special Flood Hazard Area (SFHA) or high-risk area and have a federally backed mortgage, your mortgage lender requires you to have flood insurance.


Hurricanes are Harbingers of Floods…sometimes Epic Floods Each year, an average of eleven tropical storms develops over the Atlantic Ocean, Caribbean Sea, and the Gulf of Mexico. Many of these remain over the ocean and never impact the U.S. coastline. On average of six of these storms become hurricanes each year. Hurricane can be huge storms. They can be up to 600 miles across and have strong winds spiraling inward and upward at speeds of 75 to 200 mph. Each hurricane usually lasts for over a week, moving 10-20 miles per hour over the open ocean. Hurricanes gather heat and energy through contact with warm ocean waters. Hurricanes rotate in a counter-clockwise direction around an "eye." The center of the storm or "eye" is the calmest part. It has only light winds and fair weather. When hurricanes come onto land, the heavy rain, strong winds, and large waves can damage buildings, homes, cars, and trees. When an intense tropical weather system of strong thunderstorms forms a well-defined surface circulation and maximum sustained winds of 74 mph or higher, it becomes a Hurricane.

Hurricane Category by Wind Speeds The National Oceanic and Atmospheric Administration (NOAA)’s weather service uses The Saffir-Simpson Intensity Scale to categorized hurricanes as to the strength of their winds. Category 1: Maximum Wind: 64-82 knots or 74-95 mph. No real damage to building structures. Damage primarily to unanchored mobile homes, shrubbery, and trees. Also, some coastal road flooding and minor pier damage. Storm Surge: 4 to 5 feet above normal. Category 2: Maximum Wind: 83-95 knots or 96-110 mph. Some roofing material, door, and window damage to buildings. Considerable damage to vegetation, mobile homes, and piers. Coastal and low-lying escape routes flood 2-4 hours before arrival of center. Small craft in unprotected anchorages breaks moorings. Storm Surge: 6 to 8 feet above normal. Category 3: Maximum Wind: 96-113 knots or 111-130 mph. Some structural damage to small residences and utility buildings. Mobile homes are destroyed. Flooding near the coast destroys smaller structures with larger structures damaged by floating debris. Terrain continuously lower than 5 feet above sea level may be flooded inland 8 miles or more. Storm Surge: 9 to 12 feet above normal. Category 4: Maximum Wind: 114-135 knots or 131-155 mph. More extensive building damage with some complete roof structure failure on small residences. Major erosion of the beach. Major damage to lower floors of structures near the shore. Terrain continuously lower than 10 feet above sea level may be flooded requiring massive evacuation of residential areas inland as far as 6 miles. Storm Surge: 13 to 18 feet above normal. Category 5: Maximum Wind: greater than 135 knots or 155 mph. Complete roof failure on many residences and industrial buildings. Some complete building failures with small utility buildings blown over or away. Major damage to lower floors of all structures located less than 15 feet above sea level and within 500 yards of the shoreline. Massive evacuation of residential areas on low ground within 5 to 10 miles of the shoreline may be required. Storm Surge: greater than 18 feet above normal.

The Legendary Hurricanes

To tie it all together, Category 1 storm has the lowest wind speeds, while a Category 5 hurricane has the strongest. These are relative terms because lower category storms can sometimes inflict greater damage than higher category storms, depending on where they strike and the particular hazards they bring. In fact, tropical storms can also produce significant damage and loss of life, mainly due to flooding. Katrina was a Category 5 hurricane out over some hot spots in the Gulf. But when it hit New Orleans, scientists now know that Katrina had winds at a low Category 3, and much of them Category 2, including the "left side winds" that then came down from the north and pushed the surge-swollen waters of Lake Pontchartrain over and through the levees. Only three Category 5 hurricanes have come ashore in the United States in the past century. (1) The 1935 Labor Day Hurricane (2) Hurricane Camille in 1969 and (3) Hurricane Andrew in 1992. It is a growing concern among meteorologist and scientists that Earth’s hurricane and cyclones are growing intensity.

Hurricane Ike hit us in September 2008. It was an intense category 2 hurricane, ranking the third costliest hurricane in U.S. history after Hurricane Katrina a category 3 hurricane in August 2005 and 1992’s Hurricane Andrew. In October 2012, Hurricane Sandy was the deadliest and most destructive hurricane of the 2012 Atlantic hurricane season, and the second-costliest hurricane in United States history.


Hurricane Harvey hit us in August 2017 as a Category 5 then weakening to a Category 4. Estimates for Harvey are said to be near $108 billion. Hurricane Irma hit us right behind Harvey in September 2017. The most powerful Atlantic Ocean hurricane in recorded history made its landfall in Florida as a Category 4 storm. The economic cost of Hurricane Irma could rise as high as $300 billion as the price of contracts for November 2017 deliveries of frozen orange juice concentrate is factored in. Don’t forget Florida also grow significant amounts of tomatoes, grapefruits, watermelons and sugar cane for our nation. Hurricane Harvey and Irma made history as this was the only time in recorded history that two hurricanes greater than Category 3 made landfall in the United States in the same season. Some experts agree that hurricanes are getting stronger, apparently fueled by global warming.

We Are Not Alone…There are some experts that say that we have had hurricanes that have approached category 6 but they agree that another category is not needed as the amount of damage inflicted by winds beyond 185 mph begins to look the same. Hurricane on earth can be monster storms…but they are babies compared to the massive storms of Jupiter and Saturn. Our planet is not the only one in the solar system that has hurricane-like storms. The gas giants Jupiter and Saturn, for example, churn out spinning squalls that can be bigger than the entire Earth. While these storms aren't fed by warm ocean water the way terrestrial hurricanes are, they're similar in a lot of ways, scientists say. There are storms that have thunder and lightning and rain that are bigger than earth’s hurricanes. They are also more violent. The winds on those planets are stronger, too. For example, Hurricane Irene measured about 600 miles across as it bore down on the U.S. East Coast on August 26th, 2011 to August 28th, 2011.

On the gas giant Jupiter, the Great Red Spot has been raging continuously for at least 180 years. With tumultuous winds peaking at about 400 mph, you could insert two Earth size planets within it. Many readers may not be aware that Jupiter’s red spot is a gigantic hurricane. Meanwhile, on Saturn, our scientists recently picked up a thunderstorm about 6,200 miles. This one, known as the Great White Spot, is still going strong, and some of its clouds have wrapped all the way around the ringed planet. The Great White Spot also generates lots of lightning, just like thunderstorms here on Earth. Okay enough with the space talk…let’s return to earth.

When You are in the Path of a Hurricane… It is humorous to read or watch the newspapers, television and websites reminders and articles on having the proper amounts of homeowners and flood coverages. This is particularly humorous when they issue these articles and reminders when a hurricane is imminent. I guess this activity does sell newspapers, magazines, airtime and website ads…but it is of very little help to consumers. The fact of the matter is that when you are in the path of a hurricane…you cannot purchase homeowners and flood coverages.

Temporary Moratoriums If a hurricane is approaching, insurance companies issue temporary moratoriums on binding coverage, and no new coverage can be written in that area threatened by the storm. Most major insurers will stop issuing, increasing or decreasing policies when the threat of a storm is imminent. The companies will generally resume issuing and modification processes 24 to 72 hours after the storm passes. By the way, the same idea applies to earthquake insurance. If a major earthquake results in significant losses, most insurance companies will declare a moratorium on issuing new earthquake insurance in the market affected by the seismic event. Typically, the duration of the moratorium is anywhere from 30 to 60 days. Such a moratorium often is lifted once the likelihood of damaging aftershocks has diminished.

Flood Insurance and Zones Flooding can happen anywhere, but certain areas are especially prone to serious flooding. A Flood Insurance Rate Maps (FIRM) will generally show a community's base flood elevations, flood zones, and floodplain boundaries. As a property owner or renter, you can use this map to get a reliable indication of what flood zone you're in. However, maps are constantly being updated due to changes in geography, construction and mitigation activities, and meteorological events. Therefore, for a truly accurate determination, contact your insurance agent, company, or your community floodplain manager.

Two Questions Homeowners and Home Buyers should start with are:

  1. Am I in a Special Flood Hazard Area? (Commonly called a SFHA)

  2. Am I in a High-Risk, Moderate-To-Low Risk, or Undetermined-Risk Area?.

Special Flood Hazard Area-SFHA: High-risk areas have at least a 1% annual chance of flooding, which equates to a 26% chance of flooding over the life of a 30-year mortgage. All homeowners in these areas with mortgages from federally regulated or insured lenders are required to buy flood insurance. They are shown on the flood maps as zones labeled with the letters A or V. Non-Special Flood Hazard Area or NSFHA: In moderate-to-low risk areas, the risk of being flooded is reduced, but not completely removed. These areas are outside the 1% annual flood-risk floodplain areas, so flood insurance isn't required, but it is recommended for all property owners and renters. They are shown on flood maps as zones labeled with the letters B, C or X (or a shaded X). Undetermined-Risk Areas: No flood-hazard analysis has been conducted in these areas, but a flood risk still exists. Flood insurance rates reflect the uncertainty of the flood risk. These areas are labeled with the letter D on the flood maps.

My Policy Covers Flooding…Right? Many homeowners think they are covered for flooding by their standard homeowner's policy…they are not. When in doubt…get flood coverage. Flood insurance is simple to understand and explain. It covers the direct physical losses resulting from heavy or prolonged rain, melting snow, blocked storm drainage systems and levee dam failure. The company that issued your renters, condo or homeowner's policy may provide NFIP or private flood insurance coverage.

The National Flood Insurance Program-NFIP Many homeowners automatically assume that flood insurance is outrageously expensive. This is untrue. According to the Insurance Information Institute, NFIP provides coverage for up to $250,000 for the structure of the home and up to $100,000 for personal possessions. Private flood insurance is available for those who need additional insurance protection, known as excess coverage, over and above the basic policy or for people whose communities do not participate in the NFIP. Some insurers have introduced special policies for high-value properties. These policies may cover homes in noncoastal areas and/or provide enhancements to traditional flood coverage. The comprehensive portion of an auto insurance policy includes coverage for flood damage. In 2015 the average amount of flood coverage was $243,189, and the average premium was $663.

Three Commonly Asked Coverage Questions1. Question: Does flood insurance cover flood damage caused by hurricanes, rivers, or tidal waters? Answer: Yes, providing that, if confined to your property, the flood water covers at least two acres. A general condition of flood also exists if two properties are affected, one of which is yours.2. Question: Is flood damage from wind-driven rain covered? Answer: No. When rain enters through a wind-damaged window or door, or if it comes through a hole in a wall or roof, the NFIP considers the resulting puddles and damage to be windstorm-related, not flood-related.3. Question: Is property damage from a storm surge considered flood damage?Answer: Yes, it is and, therefore, storm surge is covered by your flood insurance policy. A standard homeowners insurance policy does not cover damage from floods, such as flooding from a storm surge.Keep in mind that your standard homeowners and renters insurance policies do not cover flood damage, including damage from a storm surge. Flood coverage requires a separate policy from the federal government’s National Flood Insurance Program (NFIP), or from some private insurance companies.

Hurricane Deductibles…Now, Who Forgot To Mention That? The Insurance Information Institute (I.I.I.) recommends that homeowners review their insurance policy so that they know what hurricane deductibles apply. This should be done before they are looking into the eye of the hurricane. Hurricane deductibles are incorporated into homeowners insurance policies that are calculated as a percentage of the insured value of a house. To limit their exposure to catastrophic losses from natural disasters, some insurers sell homeowners insurance policies with percentage deductibles for storm damage instead of the traditional dollar deductibles, which are used for other types of losses such as fire damage and theft.

Example: With a policy that has a $500 standard deductible, the policyholder must pay the first $500 of the claim out of pocket. But percentage deductibles are based on the home's insured value. So if a house is insured for $300,000 and has a 5 percent deductible, the first $15,000 of a claim must be paid out of the policyholder’s pocket. The details of hurricane deductibles are spelled out on the declarations page of homeowners policies. Whether a hurricane deductible applies to a claim depends on the specific “trigger” selected by the insurance company. These triggers vary by state and insurer and usually apply when the National Weather Service (NWS) officially names a tropical storm, declares a hurricane watch or warning, or defines a hurricane’s intensity.

Due to these differences, homeowners should check their policies and speak to their agent or insurance company representative to learn exactly how their particular hurricane deductible works. Insurers’ hurricane deductible plans are reviewed by state insurance regulators. States allowing insurers to incorporate hurricane deductibles into their homeowner's policies. Nineteen states and the District of Columbia have hurricane deductibles: Alabama, Connecticut, Delaware, Florida, Georgia, Hawaii, Louisiana, Maine, Maryland, Massachusetts, Mississippi, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, Texas, Virginia and Washington DC. You should note that they are mostly coastal states in the U.S. who have faced severe natural disasters.

How Can I Buy Flood Insurance? You can only purchase flood insurance through an insurance agent or an insurer participating in the NFIP. You cannot buy it directly from the National Flood Insurance Program (NFIP).

The NFIP Partnership In order to qualify for flood insurance, a community must join the NFIP and agree to enforce sound floodplain management standards. If you live in a community that participates in the National Flood Insurance Program (NFIP), you are eligible to purchase flood insurance.


The National Flood Insurance Program (NFIP) is administered by the Federal Emergency Management Agency (FEMA), which works closely with nearly 90 private insurance companies to offer flood insurance to property owners and renters.

How Can I Buy Private Flood Insurance? Private companies that provide flood insurance are thinning as earth’s hurricane and cyclone increases. This is the primary reason the federal flood insurance program was created: Many private insurance companies stopped offering coverage for flooding following massive and expensive floods that plagued communities along the Mississippi River in the 1960s. In fact, Private Flood Insurance premiums may not be affordable when compared with the National Flood Insurance Program coverage.

Top 10 Writers of Private Flood Insurance By Direct Premiums Written

  1. FM Global

  2. American International Group

  3. Swiss Re Ltd.

  4. MAPFRE SA

  5. Alleghany Corp.

  6. Allianz Group

  7. Chubb Ltd.

  8. Validus Holdings Ltd.

  9. Munich-American Holding Corp.

  10. United Surety & Indemnity Co.

Note: Private flood includes both commercial and private residential coverage, primarily first-dollar standalone policies that cover the flood peril and excess flood. Excludes sewer and water backup and the crop flood peril. Based on U.S. total, includes territories. Source: NAIC data, sourced from S&P Global Market Intelligence, Insurance Information Institute. (Ranking will change year to year.

Flood Smart

If your insurance agent does not sell flood insurance, you can contact FloodSmart.gov

Call FloodSmart Agent Referral Program at 888-379-9531 or email support@nfipfloodsmart.com.

What Questions Should I Ask My Agent To Help Me Get The Flood Insurance Coverage I Need?

Here are helpful questions to ask your agent:

  1. Does my community participate in the National Flood Insurance Program?

  2. What flood zone do I live in? What is my property's flood risk?

  3. Is flood insurance mandatory for my property? Will the lender require it?

  4. Do I qualify for a Preferred Risk Policy?

  5. Does my community participate in the National Flood Insurance Program's Community Rating System (CRS)? If so, does my home qualify for a CRS rating discount?

  6. What will and won't be covered?

  7. Will the federal government back my flood insurance policy?

  8. How much coverage should I get for my home and for my contents?

Tip: Create Your Flood Risk Profile: Get to know your relative flood risk level. This can help you assess your risk of financial loss. Once you understand your risks, you can talk with your agent to establish a coverage amount that's right for you.


Additional Questions

  1. How can I reduce the cost of my flood insurance?

  2. Are there additional expenses or agency fees?

  3. Will my policy provide Replacement Cost Value or Actual Cash Value...and what's the difference between the two?

  4. Who should I call if I have a flood claim? Settling Insurance Claims After A Disaster

  5. How can I pay for my policy?

  6. How do I renew my policy?


Conclusion

We hope the information we have given help you as a homeowner, condo owner or renter helps you to make informed decisions about your insurance. Keep in mind that policies may have standard homeowner’s insurance policy deductibles. Others may include a “Hurricane Deductible” that is calculated as a percentage of the insured value of a house. Also, it is vitally important to remember that if a hurricane is approaching, insurance companies issue temporary moratoriums on binding coverage, and no new coverage can be written in that area threatened by the storm. The Insurance Information Institute recommends that homeowners review their insurance policy so that they know what hurricane deductibles apply.

Special Note: The Disaster Assistance Improvement Program’s (DAIP) mission is to provide disaster survivors with information, support, services, and a means to access and apply for disaster assistance through joint data-sharing efforts between federal, tribal, state, local, and private sector partners. Federal disaster assistance is usually a loan that must be paid back with interest. For a $50,000 loan at 4 percent interest, your monthly payment would be around $240 a month ($2,880 a year) for 30 years. Compare that to a $100,000 flood insurance premium, which is about $400 a year ($33 a month). Think ahead…make the right decision. Contact DisasterAssistance.gov

Just remember… You Can’t Buy Flood Insurance in the Eye of a Hurricane.

References and Resources The Weather Channel’s Hurricane Central |https://weather.com/storms/hurricane-central National Oceanic and Atmospheric Administration: National Hurricane Center |http://www.nhc.noaa.gov/ Hurricane and Windstorm Deductibles |http://www.iii.org/issue-update/hurricane-and-windstorm-deductibles FEMA's FloodSmart.gov Program: Understanding Flood Areas at http://www.floodsmart.gov/ The National Flood Insurance Program: https://www.fema.gov/national-flood-insurance-program

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