Buying flood insurance in drought stricken California doesn’t make much sense, does it? But, some mortgage lenders require a flood policy to get a
Here is a recitation on flood insurance from a variety of online sources followed by an offer for you to take action, get a quote, and get a flood plan.
Flood insurance coverage in California
Flood insurance protects your home's structure and your belongings from damage resulting from a declared flood. NFIP flood insurance policies offer up
to $250,000 in building property coverage and up to $100,000 in contents coverage.
NFIP flood insurance will cover your dwelling structure at replacement cost or actual cash value, while your belongings are covered at actual cash
value. Replacement cost means that damages to your home will be repaired up to policy limits without depreciation being a factor. Actual cash value means your possessions will be replaced based on
what they're worth after depreciation.
In order for your home to qualify for replacement cost coverage, the following criteria needs to be met:
The house is a single-family home.
You live in the house at least 80% of the year.
Your flood insurance dwelling coverage meets at least 80% of the replacement cost of your home, or the max amount available for the
home under NFIP limits.
If your home does not meet these three criteria, your flood insurance will pay out dwelling claims at actual cash
Do I need flood insurance in California?
Every county in California has had a flood disaster declared more than once in the history of the state. The Central Valley frequently floods due to
river overflow. Aging dams are a prime danger in California as well. There's also a high chance of flooding along the coast of California when high tides and large storms or tsunamis occur. In 2011,
the 9.0 earthquake in the Tohoku region of Japan created tsunami currents that did over $100 million in damage to 27 harbors along California's coastline.
According to States at Risk, flooding in California will only get worse due to climate change, with an additional 200,000 people
projected to be at risk of flooding due to sea level rise.
Just because your neighborhood hasn't flooded yet doesn't mean it won't this year. Homes in low risk areas account for 25% of all
flood claims. And in a high risk area, your chances of flooding during a 30-year mortgage are 1 in 4.
Homeowners insurance won't cover it. Only flood insurance covers the kind of damage caused by flooding.
Floods are expensive. Two inches of water could cause over $7,000 in damage. As the water rises, so do your costs.
Government assistance is rare. Only the President can declare a federal disaster and even then the aid offered is typically a loan to
be repaid with interest.
Most policies need thirty days to take effect.
What is the National Flood Insurance Program?
The National Flood Insurance Program (NFIP) is administered through the Federal Emergency Management Agency (FEMA). The NFIP enables
property owners in participating communities to purchase flood insurance from the national government. For several decades, the NFIP was the only option for flood insurance. Until recently, their
pricing structure was confusing and complicated, overcharging half of its policyholders, while undercharging the other half.
Although California has an average flood premium that is higher than the national average, you can still take several steps to lower
Increase your deductible. Your premium and deductible have an inverse relationship. If you choose a high deductible, you can lower your
Provide an Elevation Certificate. An Elevation Certificate provides information provides information on the location of your home, the
lowest floor elevation, your home's building characteristics and its flood zone. You can submit the certificate to your insurance agent to find out if you can lower your premium.
Install flood openings and fill in the basement. You can lower your premium if you install flood openings on the walls of your
What is Private Flood Insurance?
Private Flood Insurance is coverage that insures property against the peril of flood. It is funded and written by private insurance
companies instead of the National Flood Insurance Program. It is becoming increasingly popular and is often a cheaper alternative to the NFIP. Additionally, private flood insurance typically offers
higher limits and a wider array of coverage options than a comparable NFIP policy. Private Flood Insurance was not widely available until the year 2012. The NFIP does allow companies like Allstate
and Farmers to sell a "Write Your Own" policy flood insurance but it is still an NFIP policy. Private flood insurance is a small but growing part of America’s flood insurance landscape. The NFIP’s
total premiums added up to more than $3.5 billion in fiscal year 2021, according to Federal Emergency Management Agency data In comparison, private flood insurers accounted for just $302 million in
premiums in 2020, the most recent year for which data is available, according to the Insurance Information Institute
But the NFIP’s massive market share doesn’t mean it’s the best option for everyone. For example, the program’s coverage limits top out
at $250,000 for the structure of your home and $100,000 for your belongings. These amounts may not be enough if you have a large home or expensive belongings.
Compare those limits with the offerings of a private insurer like Neptune, which will cover your house up to $4
million and your belongings up to $500,000.
An NFIP policy won’t pay to repair a damaged swimming pool or replace items stored in your basement, nor will it cover the expense of
living in a hotel or rental while your home is being repaired after a flood. But these types of coverage may be available from private flood insurance companies. Some private flood insurance policies
are underwritten by surplus lines carriers. These are insurance companies that cover things standard insurers won’t. Surplus lines carriers are regulated and monitored to make sure they remain
solvent. However, surplus lines carriers don’t need to pay into a state’s guaranty fund the way standard, or “admitted,” insurance companies do. A guaranty fund will pay policyholders’ claims if an
admitted insurance company goes out of business. If you’re insured by a surplus lines carrier that goes under, you won’t have the same protection.
Pros of private flood insurance
Policies from private companies usually offer higher coverage limits than the NFIP maximums, and often a broader range of
There’s typically a shorter waiting period than the 30-day federal window.
Private flood insurance may be cheaper for some homeowners.
Cons of private flood insurance
If you drop NFIP insurance and buy private coverage, you may face a steep rate increase if you return to the NFIP.
Some private companies won’t insure all types of properties. Common restrictions
include mobile homes, houseboats and properties that have recently flooded.
NFIP policies have the backing of the federal government, which could offer more security than a private company that could
potentially go out of business.
Available in Washington, D.C., and every state except Alaska and Kentucky, Neptune offers a slick website where you can get a flood
insurance quote within a few minutes. Neptune’s flood insurance covers items an NFIP policy won’t, including damage to items in your basement, swimming pool refills and additional living expenses if
you need to stay in a hotel while your home is repaired.
Its coverage limits are also significantly higher than the NFIP’s: up to $4 million for your home’s structure and $500,000 for its
contents. Coverage takes effect 10 days after you buy the policy — or immediately if you purchase it in conjunction with a mortgage.
Term Insurance Agency or Robert Coleman does not bind coverage or issue policies. Cost of elevation certificate and photo, if required by
underwriting, are the responsibility of the applicant. Term Insurance Agency and Robert Coleman is licensed to transact flood insurance IN CALIFORNIA ONLY. We are not responsible for
electronic communication or connection failures during the application, policy management or premium transactions you conduct with us, Neptune Flood or its insurance companies. We are not authorized
to waive the waiting period, modify coverage, collect premiums or pay claims. Policies issued by Neptune Flood companies are not backed by FEMA or the NFIP. "We" refers to Term Insurance Agency and
Copyright Robert Coleman 2023