Frequently Asked Questions: FEMA Flood Insurance

Here’s a transcript of the video:

Good morning. Every week we try to deal with different Frequently Asked Questions as it relates to the insurance industry. The focus of this week’s discussion will be FEMA Flood Insurance.

Many people are questioning me on a regular basis. They’ve heard that “the rates are the same,” “What is a FEMA policy?” etc. Essentially, FEMA is a federal agency, and the concept is that it’s good for business for there to be an insurance marketplace for flood coverage so that people can buy flood insurance on their properties.

The way it works is relatively simple. There used to be a very, very limited number of insurance companies that administered the policies on behalf of FEMA. Over the last 10 to 15 years, there has been tremendous growth in the number of companies that offer that product. So, you can go to Philadelphia, MetLife, Travelers, etc. — all offering FEMA flood policies. All those policies are really just administered by the insurance company.

They’re backed by FEMA and the rates and terms and conditions are identical.

So, what does that mean? Yes, the rates are identical — provided that the information and variables submitted to them were done correctly. So, if you have a broker that is not trained in placing FEMA policies and incorrectly put in the elevation certificate information or didn’t know how to answer the different questions appropriately, the rates will be different.

The real quick and dirty on it is that if you are in a low-hazard flood zone in most states, most often FEMA is the best deal provided the home is your primary residence. If you’re in a high-hazard flood zone, there has been a real new market of private-market flood companies that can offer very competitive deals.

We see on a regular basis 30% to 40% savings in high-hazard flood situations.

Obviously, as usual, you must be dealing with a qualified agent who both knows the private-market flood environment as well as FEMA, and knows that they’re inputting the information correctly. We’ve seen policies that were submitted incorrectly, and the premium was 400% of what it should be.

Give us a call. We’re here to help! (561) 287-6279.