Important for homeowners to compare flood insurance options

As hurricane season approaches its peak, Manatee County homeowners may want to explore new flood insurance options offered by private insurance companies. Better predictive modeling technology and a bill passed by the Florida Senate two years ago allow for private insurance companies to offer flood insurance policies as an alternative to the National Flood Insurance Program.

But homeowners searching for the best deal may find it means sticking with NFIP coverage.

“There are some consumers who will still buy NFIP coverage because the NFIP has subsidized or grandfathered rates and we recommend those folks stay with NFIP,” said James Watje, vice president of national sales and marketing for Universal Insurance Company of North America. For those not covered by grandfathered rates, private flood insurance may be the better deal.

Watje’s company offers policies that provide up to $3 million in protection for dwellings, while the NFIP’s limit is $250,000. The NFIP also requires a 30-day waiting period for policies separate from new homeowner’s insurance policies, while Universal Insurance Company of North America’s have no waiting period.

The National Flood Insurance Program, through the Biggert-Waters Reform Act, has attempted to eliminate subsidies and require policyholders to pay premiums based on actual risk to pay back the program’s more than $20 billion in debt.

Another piece of legislation, the Homeowner Flood Insurance Affordability Act, was signed into law by President Barack Obama in 2014. The 2014 Act lowers the rate increases implemented in 2013 on some policies, prevents some future rate increases and institutes a surcharge on all policyholders, according to the Florida Office of Insurance Regulation.

Floridians carry the most flood insurance policies in the nation and contribute the most money to NFIP compared to other states in the country, according to the Federal Emergency Management Agency. The elimination of subsidized rates and skyrocketing flood insurance rates threw Florida’s housing market for a loop when Biggert-Waters passed in 2012, especially in certain parts of the state.

“Pinellas County and the Tampa Bay market is the most heavily subsidized market in the country,” said Sen. Jeff Brandes, R-St. Petersburg. “We had homeowners whose flood insurance rates went from $1,000 to $8,000 when Biggert-Waters passed. It almost shut down the housing market in six months.” The concern over an unstable housing market led Brandes to write SB 542, which allows private companies to enter the flood insurance market.

The NFIP determines risk by area and in high-risk areas, consumers with mortgages from federally regulated or insured lenders are required to buy flood insurance. For those living in moderate-to-low risk areas, flood insurance is not required but suggested. Private insurance companies tout “sophisticated new modeling technology” allows them to determine risk at the home level, according to a release from Milliman, an independent actuarial services provider.

“Today’s flood models allow insurers to price at a more granular level, giving them the ability to discern any home’s unique risk,” Milliman Principal Matt Chamberlain said in the release. But private insurers who are entering the flood market often will not write policies for homes at the highest risk of flooding.

Sandy Tudor, Manatee County floodplain management coordinator, said the jury’s still out on whether the private insurance options are better than what’s offered by the NFIP.

“Truthfully, I don't know if they're better,” Tudor said. “They give you a little more options. They give you the option of just insuring for the balance of your mortgage and they give you more options as far as deductibles.”

Manatee County Commissioner John Chappie said research is key in choosing a flood insurance policy.

“As far as the other options, you look into them and see which one is the best deal for your situation,” Chappie said. “Different zones for different areas give you different rates, and it’s something you just have to do your homework on and find the one that fits you best.”

For a list of private flood insurance writers in Florida, visit the Florida Office of Insurance Regulation’s website at floir.com.

This story was originally published August 5, 2016 at 10:48 AM with the headline "Important for homeowners to compare flood insurance options."