New to Selling Private Flood Insurance? Start here.
Are you a personal lines insurance agent looking to (pardon the pun) dip your toe in the water of selling private flood insurance? The team here at Aon Edge has been in the flood insurance industry for many years, not just on the sales and underwriting side, but as agents and customer service specialists. From our collective experience, here are a few things we think you should know.
What is private flood insurance?
Private flood insurance is an insurance policy issued by an insurance company to cover financial losses to a home’s structure or contents due to a flood, subject to the terms of the issued policy. The public option, the National Flood Insurance Program (NFIP), is administered by the Federal Emergency Management Agency (FEMA). For years, the NFIP was the only flood insurance option available. The landscape changed in 2012 when Congress passed the Biggert-Waters Flood Insurance Reform Act
. A rule change in 2019 further bolstered the private flood market by mandating lender acceptance of policies that satisfy the statutory definition of “private flood insurance.”
What does flood insurance cover?
When your client is sorting through the damage and distress caused by a catastrophe, they may not stop to think about the industry definition of a flood. But these things matter when it comes to helping your client recover from a loss, and the source of water damage will impact how a policy will respond to a claim.
Policies provided through Aon Edge include the NFIP’s definition of a flood
A general and temporary condition of partial or complete inundation of 2 or more acres of normally dry land area or of 2 or more properties (at least 1 of which is the policyholder's property) from:
- Overflow of inland or tidal waters; or
- Unusual and rapid accumulation or runoff of surface waters from any source; or
- Mudslides (i.e., mudflows) which are proximately caused by flooding and are akin to a river of liquid and flowing mud on the surfaces of normally dry land areas, as when earth is carried by a current of water and deposited along the path of the current.; or
- Collapse or subsidence of land along the shore of a lake or similar body of water as a result of erosion or undermining caused by waves or currents of water exceeding anticipated cyclical levels that result in a flood as defined above
It’s important to note that Aon Edge’s private flood insurance product, EZ Flood
, provides higher coverage limits versus the NFIP on both the building (up to $1.25M vs. $250K) and personal property ($875K vs. $100K).
Who should purchase flood insurance?
FEMA uses various geographic and statistical factors to designate flood zones
. If your client is purchasing a home in a Special Flood Hazard Area (Zone A or V) and wants a federally-backed loan, the lender will require flood insurance. Flood insurance is not mandatory for homes situated in Zones B, C, and Z, although you may want to let your client know that 1 out 4 claims are for properties in one of these lower risk areas
Risk Rating 2.0 – How flood insurance rates will be determined
You may have heard about some changes coming to the world of flood insurance. This is Risk Rating 2.0, a FEMA initiative to introduce more data sources into how flood risk is calculated – and priced – for each individual residence. There is no telling how much an NFIP premium might change
for your client without quoting a new policy.
Pricing for EZ Flood private insurance, on the other hand, is unaffected by Risk Rating 2.0. Aon Edge’s markets were already using a sophisticated dataset to calculate premiums
and considered factors like elevation and distance-to-water, replacement cost and coverage amounts, and primary dwelling and claims history.
Flood Insurance Education
If you really want to dive into the deep end of flood insurance, The Institutes offers a certification program
that will designate you as an Associate in National Flood Insurance (ANFI). The NFIP-based curriculum consists of three courses:
- National Flood Insurance: Fundamentals
- National Flood Insurance: Advanced Studies
- Ethical Decision Making in Risk and Insurance
You’ll receive instruction in all aspects of flood insurance, from quoting and writing to underwriting and rating. If that requires more time than you have to give right now, the Aon Edge website can help answer your most pressing questions:
As you begin your flood insurance sales journey, don’t hesitate to reach out to us with any questions. We’re here to make this easy for you.
This article is provided for general informational purposes only and is not intended to provide individualized advice. All descriptions, summaries or highlights of coverage are for general informational purposes only and do not amend, alter or modify the actual terms or conditions of any insurance policy. Coverage is governed only by the terms and conditions of the relevant policy.