Flood Insurance - What Consumers Need to Know

National Flood Safety Awareness Week - March 14-18 2011
In recognition of National Flood Safety Awareness Week, the Gulf State Insurance Information Center is pleased to assist in the effort to educate and inform communities about the importance of flood insurance coverage.

Louisiana knows all too well the impact from massive flooding. Hurricane Katrina produced $13.1 billion in flood claims, and, one month later, Hurricane Rita added an additional $336 million to that total. The lesson learned was to buy flood insurance for future storm protection.

The following links provide useful information to help consumers understand the importance of flood preparedness and protection.
Flood Preparation and Safety

Why You Need Flood Insurance

After the Flood

Congress Holds Hearing on Flood Insurance ReAuthorization
The House Financial Services Committee’s Subcommittee on Insurance, Housing and Community Opportunity held a hearing March 11 on legislative proposals to reform the National Flood Insurance Program (NFIP). The NFIP currently operates with $17.75 billion in debt. The NFIP, last reformed in 2004, has failed to charge sufficient rates to cover its risk which has resulted in significant exposure to taxpayers. The Subcommittee will review a discussion draft proposal that provides for a long-term reauthorization and important reforms to the NFIP that would improve its financial stability, reduce the burden on taxpayers, and examine ways to increase private market participation.  Learn More>>

Flood Insurance - What Consumers Need to Know
Floods are the most common natural disasters to occur in the United States and they can occur in every part of Louisiana.

Homeowners Insurance vs. Flood Insurance
A standard homeowners insurance policy provides financial protection against disasters by insuring the home itself and the things inside it. Homeowners insurance is a package policy that covers both damage to property and the homeowners’ liability or legal responsibility for any injuries and damage to property caused on the premises. While damage caused by disasters such as wind and fire is covered, damage to personal and commercial property caused by a flood is not covered under most personal and commercial property policies.

However, separate flood insurance is available from the NFIP or even some private insurers. As the ultimate underwriter of the vast majority of homeowner’s flood insurance, the NFIP is the primary source for flood insurance in the U.S.

The NFIP was established by Congress in 1968 and it is administered by the Federal Emergency Management Agency (FEMA), a component of the U.S. Department of Homeland Security (DHS). More than 22,000 communities across the United States and its territories participate in the NFIP by adopting and enforcing floodplain management ordinances to reduce future flood damage. In exchange, the NFIP makes federally backed flood insurance available to homeowners, renters and business owners in these communities. To help improve services to NFIP policyholders and make flood insurance easier to purchase, the “Write-Your-Own” (WYO) program was set up by FEMA to allow private insurers through their agents to write NFIP flood insurance policies. WYO insurers write the majority of the federally backed policies in the NFIP.

What Does NFIP Flood Insurance Cover?

  • Flood insurance covers direct physical losses by flood and losses resulting from flood-related erosion caused by waves or currents of water exceeding anticipated cyclical levels and accompanied by a severe storm, flash flood, abnormal tide surge, or a similar situation which results in flooding.
  • The standard flood policy for homeowners covers structural damage, your air conditioner, furnace, water heater and cleanup associated with a flood. In addition, you can purchase coverage for the contents of your home as part of the flood policy.
  • Buildings are covered for replacement cost but coverage for personal possessions is available on an actual cash value basis only. Coverage for the contents of basements is limited and usually only covers a home’s foundation elements and equipment that is necessary to support the structure (for example: furnace, water heaters, circuit breakers, etc.).
  • There is a 30-day waiting period before the coverage becomes effective.

National Flood Insurance Program