- 15 December, 2022
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Private Flood Insurance
IN THIS CASE, CHANGE IS GOOD!
If you live in a flood zone, effective December 21, 2022, homeowners with FHA-insured mortgages can get private flood insurance from companies that adhere to FHA (Federal Housing Administration) requirements.
This is a huge victory for homeowners and homebuyers because you get to choose less expensive policies and enhanced coverage!
According to HUD (The U.S. Department of Housing and Urban Development) Secretary Marcia L. Fudge, “Today, HUD is increasing the flood insurance choices available to individuals and families with FHA-insured loans in areas that FEMA has designated to be at special risk for flooding. Flood insurance is required to ensure families and individuals are prepared if disaster strikes. Increasing consumer options for this important protection is one way we are building more resilient communities in the face of climate change.”
This new rule is great news for borrowers and homeowners by allowing a wider range of more affordable options for enhanced flood protection.
Here are some important things to remember:
- The private flood insurance policy must meet or exceed the standard NFIP (National Flood Insurance Program) flood insurance policy.
- Your mortgage lender may require more flood insurance than required in order to protect the financed property.
- You can only switch providers during the open renewal window, because if you miss the renewal period, you’ll be stuck with the federal flood policy.
COVERAGE
The biggest difference between federal and private flood insurances policies is coverage. Private policies typically are more flexible, and you could easily go above the minimum required coverage limit. This is a bonus for owners with more expensive properties; the policy is usually more affordable with a very comfortable amount of coverage.
CLAIMS
Private flood insurance companies often provide additional coverage for rent and living expenses while you await repairs. If you’re able to switch to a private company, your claims history will reset, and you’ll get a fresh start with a new company.
Lenders are required to provide detailed coverage information when electronically submitting mortgages for FHA insurance on properties in Special Flood Hazard Areas (SFHAs). This allows the FHA to collect and analyze more detailed mortgage flood insurance information than possible previously.
Flood claims are tracked and multiple claims may appear on the Repetitive Loss List, which may limit your ability to use private flood insurance.
