With many beachfront properties and abundant rainfall in Florida, flood insurance is a necessity. According to FEMA, floods are the most destructive natural disaster in the U.S., causing $24 billion in damages over the last 10 years. The National Flood Insurance Program (NFIP) writes more flood insurance policies for Florida than any other state. The good news: Recent pushes in state and federal government can make flood insurance even more accessible to Florida homeowners and business owners.
What many don’t realize about flood insurance is that it’s not usually covered under renter, homeowner, or commercial property insurance policies, so it must be purchased separately. In high-risk areas, the chance of a flood during the term of a 30-year mortgage is 26 percent. The term “high risk” applies to much of Florida -- FEMA has designated the whole state as a flood zone.
While it may seem tempting to wait for flood-related disaster assistance from the state or federal government, a disaster proclamation isn’t made unless flooding damage is widespread and extensive. This means that areas affected by minor flooding might not receive assistance. Government assistance also takes the form of a loan, which must be paid back with interest, so it makes more financial sense to buy a flood insurance policy rather than owing on a loan.
Flood insurance is highly recommended even for those who don’t live in a flood plain or a high-risk area. The risk of flooding in an area can change over time, and nearly 25 percent of all flood insurance claims actually occur in areas considered to be of moderate or low risk. The cost of flood insurance might be a concern for some, but in reality they can be far less expensive than potentially having to restore a home and its belongings. Flood insurance plans can be as cheap as $119 a year for low-risk areas, but on average they cost less than $570 a year. Today, there are over two million flood insurance policies in place in Florida.
Last year NFIP sparked some discontent with premium increases for about 268,500 homeowners in high-risk areas and with older homes. To answer public outcry, the federal government passed the Homeowners Flood Insurance Affordability Act in March, repealing FEMA’s authority to increase rates at time of sale or new flood map, and refunding excessive premiums to people who bought homes before FEMA’s warning of increased premiums.
At the state level, last Month Gov. Rick Scott signed a bill into law that opens up more options to flood insurance shoppers by authorizing private to offer flood insurance plans independently of the NFIP. Under this bill, homeowners will be able to save money by buying less insurance than the NFIP currently allows. Rather than having to buy a policy of $250,000 for a home, the homeowner can instead choose to buy a policy through a private company that covers just the outstanding value of their mortgage, the replacement cost of the property, or the cash value of the property. Private insurance companies can also offer more options for deductible amounts and the coverage of a home’s contents, living expenses, and secondary structures. The goal of the bill is to offer consumers a choice in their insurance and propel Florida into a leading position among the nation in the flood insurance market.
According to reports from Florida Realtors® and the Palm Beach Post , there’s sunshine on the horizon for concerned Florida homeowners. Phase I of the Homeowners Flood Insurance Affordability Act went into effect on May 1, rolling back insurance rates and offering relief to many homeowners struggling under last fall’s premium hikes. While private insurance companies have been initially slow to enter the Florida market, millions of dollars are being invested in advanced weather modeling and risk assessment technologies. Armed with cutting-edge technology, the private flood insurance industry looks to have a bright future in Florida --and this means a win for insurance buyers as well.
Although flood insurance may seem like just another bill, the peace of mind a flood insurance policy brings can be invaluable, especially in high-risk areas like Florida, which is almost completely surrounded by the ocean and sees its fair share of severe wet weather. Florida is also paving the way for private insurers to expand the flood insurance market and offer help to Florida residents who have been feeling the effects of premium spikes.
Sarasota Area Real Estate Specialist