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Insurance Broker | 3 min read

Talking Flood Insurance with Clients Living Outside of a Flood Zone

On January 4, 2023, the Insurance Commissioner for the California Department of Insurance, Ricardo Lara, issued an alert to insurance companies, agents, brokers, and state residents:

Many people may not be aware that homeowners and commercial insurance policies typically exclude flood, mudslide, debris flow, and other similar disasters — unless they are directly or indirectly caused by a recent wildfire or another peril covered by the applicable insurance policy. With continued winter storms threatening areas already damaged by wildfires, it’s critical to know how you are protected especially if you are living in a more vulnerable area.

Unfortunately, with climate change making severe weather patterns more intense, frequent, and less predictable across the country, the definition of a “vulnerable area” is becoming murkier.

A prime example — in early January, the powerful winter storm system that swept across California dumped 16 inches of rain in some counties around Los Angeles and triggered mudslides and severe flooding. The unseasonable and unusually heavy rain ravaged homes across the state, where only 2% of residents have flood insurance.

Climate change is also exacerbating the problem. A recent assessment by the U.S. Global Change Research Program found that "atmospheric rivers" such as the ones that wreaked havoc in California earlier this month, will become more frequent and severe as global temperatures rise. This means flooding events like this will no longer be considered rare, one-in-a-hundred-year occurrences.

This challenge is not limited to California. After years of hurricane damage in Florida, it’s becoming harder for home and business owners to even find carriers to insure their properties.

When Hurricane Harvey hit Houston in 2017, it left over 200,000 damaged homes in its wake and caused $125 billion in total damages. Of the houses and businesses affected by the storm, 80% were located outside of the 100-year flood plain. The vast majority of these property owners did not have flood insurance.

Talk to Your Clients About the Value of Flood Insurance—Even if They Don’t Live in a Flood Zone

As a homeowners insurance agent or broker, it is important to understand the gap in coverage that exists for your clients when it comes to flood damage. While homeowners insurance may cover damage caused by wind, fire, and other natural disasters, it typically does not cover damage caused by floods. Unfortunately, many homeowners are not aware of this and do not have flood insurance in place to protect their homes and possessions.

Here are a few highlights of private flood insurance that may help your clients understand how private flood insurance could benefit them:

Higher Coverage: Private flood insurance typically offers a higher coverage level compared to the National Flood Insurance Program’s (NFIP’s) $250,000 limit on homes and $100,000 limit on belongings.

Shorter Wait Times: NFIP takes 30 days to go into effect, but with some private insurers, coverage could go into effect in less than a week—sometimes, immediately.

Additional Flood Assistance: If your client has to temporarily relocate, private insurance may provide for short-term housing. Depending on the policy, they could also potentially purchase coverage for items or areas not covered through NFIP.

Lower Cost: Private flood insurance uses advanced modeling and topography to asses an insured’s flood risk and they’re regularly able to offer coverage options that are less expensive than that offered by the NFIP.

SWBC's excess flood insurance and NFIP alternatives for primary flood coverage go above and beyond the standard coverage limits. The program also covers funding for living expenses to help the insured through the transition process, which is something the NFIP does not offer. Excess coverage provides up to (and even above) $5 million to rebuild a home or business as well as stand-alone contents that may be valued above the NFIP limits.

As an insurance agent, you know your clients look to you to help them protect their homes and property in the event of a worst-case scenario. Hopefully, your clients will never have to use their flood insurance—but it’s always best to help ensure they’re covered in case disaster strikes.

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John Hannah

John Hannah is the AVP of Product Management for SWBC Insurance Partners. In his role, he reviews and analyzes P&C insurance product programs to meet and exceed financial goals. He assesses the risk and profitability of prospective and existing clients, to include underwriting, coverage and pricing recommendations.

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