Renewing Flood Insurance
Flood insurance policies do not renew automatically, so it is important to work with clients every year to ensure their coverage does not lapse.
Additionally, customers may be at higher risk of lapsing in the first two years of being a policyholder, so pay particular attention to new clients in your portfolio.
It’s important to let clients know that just because they haven’t experienced a flood doesn’t mean they never will. The Tiptons purchased flood insurance for more than 20 years before experiencing a catastrophic flood event. Continuous coverage gives your clients uninterrupted flood protection.
Talking points: “Why should I renew my policy?”
During policy renewals, discuss the following talking points with clients:
An afternoon storm, backed-up storm drains, or new construction in your area could bring inches of water into your home, causing thousands of dollars in damage to walls, floors, and furniture. And most homeowners insurance doesn’t cover flood damage.
If you live in a high-risk area and have a loan from a federally regulated or insured lender, you are required to renew your flood insurance. When you purchase a home, you accept liability for any damage from fire, wind, hail, theft, or flooding that may occur while you live there. If you choose not to purchase a policy, your lender will force-place a policy at a much higher cost.
With Risk Rating 2.0: Equity in Action, FEMA is taking a phased approach to rolling out new rates. In Phase 1, new policies beginning October 1, 2021, will be subject to the new rating methodology. Also beginning October 1, 2021, existing policyholders eligible for renewal will be able to take advantage of decreases in their premiums at time of renewal. In Phase II, all remaining policies renewing on or after April 1, 2022, will be subject to the new pricing methodology. This phased approach allows the agency to execute its promise to deliver rates that are equitable, easier to understand and reflect each property’s unique flood risk.
Renewal: Your client's annual flood insurance “checkup"
Clients will be notified of their upcoming policy renewal window by their insurance company. FEMA may also mail a renewal reminder letter during this time.
Every year after renewing, your clients will receive a copy of the Flood Insurance Claims Handbook, Summary of Coverage, and a loss history for their property – making renewal a crucial moment to help clients understand their specific flood insurance needs.
When renewing, take the time to review the following with your clients:
Make sure your clients understand their coverage and review if the current coverage is still adequate. This is also a good time to explain exclusions and limitations specific to NFIP flood insurance, as well as other coverages – including excess coverage – that may be available for their needs.
When a policyholder wants to cancel
Even if your client has never experienced a flooding event, they are still at risk. John and Michelle Tipton went more than 20 years without a flood. They were glad they maintained their policy when they lost everything during Hurricane Matthew. They were able to rebuild their home and their lives thanks to flood insurance.
It’s important to talk to your client about the hidden and changing flood risks over time. Changes occur due to runoff of surface waters from any source, changing weather patterns that cause overflow of inland or tidal waters, wildfire, and mudflows.
The fact is that floods are the most common and costly natural disaster and only flood insurance covers flood damage. It’s important to show the value of flood insurance to your clients if they are considering cancelling:
- Once they let the policy lapse, there is a 30-day waiting period required for a new flood insurance policy to become effective.
- They may be ineligible for future FEMA Disaster Assistance for Individuals and Households.
- If they live in a high-risk flood zone and have a federally backed loan, they are required to renew their flood insurance every year.
What to know about cancelling your client’s policy
Flood policies may be terminated mid-term or full-term and your client may be entitled to a full, partial, or no refund depending on their individual cancellation reason. Please refer to the NFIP Flood Insurance Manual- Section 6 for more information.
Does your client qualify for cancellation?
To help inform and reduce confusion, agents should review the Cancellation Reason Codes table in the Flood Insurance Manual to determine what qualifies as a cancellation, what documentation is required and eligibility for refunds.