HOUSTON – This hurricane season is expected to be very active, and we have seen the devastation flooding can cause in the Houston area. If you don’t already have flood insurance, you should consider it. And this year, there are many more options to consider because more companies are now offering private flood insurance.
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We spoke with insurance broker Jessica Fuentes with Brazos Insurance Agency. She sells both private policies and National Flood Insurance Program policies through FEMA.
“I think the reason that we’re seeing more options right now is because lenders have changed their rules as far as what’s required for flood insurance for new purchases,” Fuentes explained. “So in the past, you’d have to go FEMA flood in order for you to qualify to close on the home. And they’re now accepting private flood policies. So all the private flood carriers that were out there already, are now writing more business because these new home purchase clients are going out looking for comparative prices between FEMA flood and private flood.”
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Fuentes says there are advantages and disadvantages of both types of policies.
What you get with the National Flood Insurance Program
- Maximum coverage of $250,000 to rebuild your property, no matter how much your home is worth
- Maximum payout of $100,000 for contents that are damaged
- These plans pay actual cash value (ACV), meaning what your property is worth when it is damaged- not what it will cost you to replace it.
- Takes 30 days to take effect when you pay premium.
- Since these policies are backed by the federal government, they are more reliable. You don’t have to worry about FEMA going out of business.
What you get with Private Flood Insurance
- Unlimited coverage to rebuild your property. If your home is worth $400,00, you can pay for $400,000 worth of coverage.
- Unlimited payout for contents that are damaged.
- If you pay for it, you can get full replacement cost value for your home and property.
- These policies often offer living expenses when you are unable to live in your home.
- Policy takes effect immediately when you pay premium.
- These are offered by private insurance companies, susceptible to going out of business in a big storm. They could close and you wouldn’t be able to repair your home.
- These policies may not be affordable if you live in an area at a higher risk of flooding.
Wait! Before you switch or cancel flood insurance...
Here is something else you need to know. FEMA reset its rates for flood policies in 2021. They already know how much you will pay for flood insurance every year. If you have a policy now, as long as you renew it every year, your rates will go up incrementally until you reach that set rate. If you cancel or move to a private flood insurance policy, but then go back to the National Flood Insurance Program, your new rate will be at that top rate FEMA set for your property in 2021.
To find out what that rate is for your home, you can call an insurance broker and ask them to give you a flood insurance quote as if you are a brand new customer. That will be your max rate. You can learn more about this from my conversation with Leash Yu of Agency Yu Higginbotham here.
