Policyholder Question: Buying Flood Insurance and What You Need to Know

Here is an insurance claim question that we recently answered as a contributing member of insurance claim experts for United Policyholders who advocates for property owners. 

Q. I have been offered a job in Wilmington, NC and would like to live in a nearby beach community such as Surf City, NC.  Other than USAA, What is the best insurance carrier for flood insurance? 

A. Before I answer your question, please allow me to give you some background on flood insurance as our public adjusting firm has seen significant changes over the years. Because of the high risk of flooding and the widespread damages that often result, the insurance actuarial folks could not manage or price this peril so as to set an affordable premium. Thus the private insurance industry was simply not agreeable to assuming the flood risk. Thus, flood losses were excluded in most all standard property insurance policies. In 1968, the National Flood Insurance Program (NFIP) was created by an act of Congress as the lack of this coverage was affecting the economy and commerce. In the beginning years, this program while providing flood coverage, was very poorly run and claim service was terrible. Probably not surprising given that the NFIP was headquartered in Washington, D. C. as it quickly became a typical Washington bureaucracy, unresponsive and extremely difficult to work with.

As a result, several significant changes were made to the program. The first was with assigning a loss with a flood and wind component to the same adjuster (Single Adjuster Program) to avoid the age old argument of which came first, the wind or the water. While in principle a good idea, there were conflicts as to the allocation of damages from the flood claim (government money) vs. the wind which was the private or for-profit insurance company's money.  Now the single adjuster program is out of favor and the NFIP controls the process through flood certified adjusters. The other big change was the authorization of the Write Your Own program which means that the for-profit insurance companies would not only write the policies but also provide claim adjusting services through certified flood adjusters. For this service they bill the government some agreed percentage. There are also private companies that adjust flood losses through a contract with a vendor that contracts with the government.

The flood insurance underwriting business and the adjustment of flood losses is now big business, i.e., there was a recent purchase of a flood vendor for $650 million dollars. But still at the end of the day, flood payments are federal money collected in premiums which has worked well until recent years. Now the program is billions of dollars in debt because of several recent hurricanes and storms. An overhaul of the program was passed in Congress with the Biggert-Waters legislation (since partially repealed) in attempt to significantly increased premiums. As it stands now, the federal flood insurance program solvency is an issue. The Florida legislature recently passed a law allowing private for-profit companies to sell flood insurance. How this will play out is anyone's guess. For now, I would stick with USAA or one of the other national insurance brands that service flood insurance through the Write Your Own Program. At least they have the backing of Congress (not to mention their reputations) which can appropriate money as necessary to pay claims.

Finally, because there are policy dollar limits as to how much the NFIP will write, there is a private market for flood insurance called excess flood coverage. A lot of this coverage is written through surplus lines carriers (un-regulated) and some companies do write manuscript policies with flood coverage for clients with unique assets and exposure. Flood insurance is extremely important and property owners need to be aware of the risk and their exposure to this peril. Good luck with your move to Surf City N.C.

If you have questions regarding any property insurance claim related issues please call 800.321.4488 or contact us to submit a question to one of our public adjuster or insurance claim experts.


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"On Property" Insurance Claim Tips Blog

Tips and advice about how to properly file and protect your property damage insurance claim and get a fair settlement. We invite all readers to ask questions about their claim so our public adjusters can post answers for others to benefit. Insurance claim expert guest bloggers welcome to submit posts via our contact form.


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