Flood Insurance: FEMA resources offer better ways to serve clients

As we are well aware, flooding caused by hurricanes and tropical storms can wreak havoc along the Eastern Seaboard and Gulf Coast from June through November. What many fail to realize, however, is that flood risk is
not limited to summer and fall months alone, nor to just the East Coast and Southeast.

Winter rain and spring snowmelt — both common occurrences throughout the U.S. heartland — are often overlooked as significant flood threats, despite causing millions of dollars in property damage year after year. This threat is compounded by the potential danger of levee failure along rivers, tributaries and waterways. For millions of Midwest residents, flooding is an ever-present risk.

Recent Midwestern floods

History reminds us how severe the danger of flooding can be. The Great Midwest Floods of 1993, which took place from April through October along the Mississippi and Missouri Rivers and their tributaries, is the costliest river-related flood in history, causing over $20 billion in property damage. Levees failed as rivers crested nearly 20 feet above flood stage. More than 20 million acres in nine states were inundated, leaving approximately 50,000 homes either damaged or completely destroyed.

A few years later, the Red River Flood of 1997, which swamped large areas of North Dakota and Minnesota from April through May, caused $2 billion in property damage. Thousands of homes were inundated as rain and melting snow caused the river to rise well above flood stage, breaching dikes and overtopping levees in Grand Forks and East Grand Forks. It was the most destructive flood along the Red River since 1826.

Millions still unprotected

Already this season, Midwestern snowfall has set the stage for potential flooding in 2007. Several severe winter storms and blizzards have impacted Kansas, Nebraska and Colorado, leaving thousands of homeowners under more than a foot of snow. For these states and others, especially those adjoining the Mississippi River, the risk of flooding increases as snows melt and spring rains move in over the next several months.

According to a 2004 Rand Corp. study, however, only 22 percent of Midwestern single family homes located within Special Flood Hazard Areas (SFHAs) are covered by flood insurance from the National Flood Insurance Program (NFIP). SFHA properties — those at the highest risk of flooding — receive such designation because historical records, hydrology and hydraulics show that significant floods have occurred in the region and will occur again. Lending institutions require flood insurance to protect collateral interests that are located in SFHAs, as a condition of granting mortgage loans. Property owners would be well advised to also protect their financial interests.

The RAND study also revealed that only 0.4 percent of single-family Midwestern homes outside of SFHAs are covered by flood insurance. The figures are staggering — especially when one considers the risks involved.

Too often, residents underestimate the likelihood of being affected by the number one natural hazard in the United States, and statistics further illustrate the danger. A home in a SFHA has a 26 percent chance of being damaged by a flood during the course of a 30-year mortgage, compared to a 9 percent chance of fire. Roughly 20-25 percent of all claims paid by the NFIP are for policies in low- to moderate-risk areas (those outside of SFHAs). Based on these figures, it appears there are more than a few property owners and renters in America’s heartland that can benefit from a flood insurance policy. And it’s not too late to offer protection to customers who are uninsured against flood damage — particularly those who live in a SFHA.

Selling flood insurance: what can agents do?

If you haven’t already done so, I urge you to learn the ins and outs of flood insurance before your clients ask for your assistance. Unlike most standard homeowners policies, flood insurance covers property losses caused by flooding. A policy covers structural damage; furnace, water heater and air conditioner; flood debris clean up; and floor surfaces such as carpeting and tile.

In addition, contents coverage financially protects the contents of a building or structure, including such items as furniture, collectables, clothing, jewelry and artwork. Visit http://www.fema.gov/business/nfip/manual.shtm to download the Flood Insurance Manual and view a comprehensive list of structural damage and/or contents items.

Flood insurance is available to homeowners, business owners and renters in the more than 20,200 communities that participate in the NFIP. The NFIP’s coverage limits can insure property up to $250,000 for residential building coverage and $100,000 for contents; $500,000 for nonresidential building coverage and $500,000 for contents. The average flood insurance policy costs about $500 annually and the lower-cost Preferred Risk Policy (PRP) starts at just $112 a year, offering coverage to residents who are located in low- to moderate-risk areas.

It’s important to know there is generally a 30-day waiting period from the time a flood insurance policy is purchased to when it goes into effect. That’s why now is the time to reach out to your current and potential customers — especially those within a SFHA — and educate them about the importance of flood insurance. Now is also the time to evaluate your business’ coverage, since protecting your place of employment shouldn’t be neglected.

Agent resources

Flood insurance is easier to write than you think. It is a critical companion to homeowners insurance, and as we’ve already learned, there is an enormous opportunity to make a difference. The NFIP’s FloodSmart Cam-paign offers tools, resources and programs to help agents market and sell flood insurance and grow your business.

The Web site developed for agents, Agents.FloodSmart.gov, includes a comprehensive array of information to help you
take advantage of everything the FloodSmart Campaign provides. By registering on

the site, you will have direct access to easy-to-use tools and resources to maximize
your flood insurance policy sales. Agents.FloodSmart.gov is simple to navigate and puts a broad range of information at your fingertips, such as the latest flood insurance product updates, newsletters, talking points, training classes (both in-classroom and online), tips for increasing your visibility as a flood expert, local flood map change alerts and the free Agent Co-Op and Referral programs.

Agent Co-Op program

Agents are eligible for the Agent Co-Op Program, which helps you plan and execute your own local advertising campaign and makes your advertising dollars go farther. The program provides advertising tools and downloadable templates you can use to easily expand your flood portfolio — and reimburses you for a portion of advertising costs. And by completing a state-approved flood insurance continuing education course, trained agents are eligible for an additional 25 percent reimbursement. Be sure to take advantage of this program to maximize your marketing efforts.

Agent referral program

By registering at Agents.FloodSmart.gov, agents will become enrolled in the Agent Referral Program, an excellent way to get qualified leads and grow their flood business. The program connects enrolled agents to customers in the same area who are ready to speak with an agent about their flood insurance needs. When prospective customers learn their potential flood risk and get policy cost estimates through FloodSmart.gov, they can also be connected with a local agent through the Agent Referral Program.

The need to help Midwesterners protect their financial assets with flood insurance is something you can bring to the attention of your friends, neighbors and customers. The NFIP has created a range of resources to help make selling flood insurance easier, and we are ready to answer your questions at any time. For more information, call 800-427-4661.

David I. Maurstad serves as director of FEMA’s Mitigation Division and Federal Insurance Administrator. In this position, he provides leadership for some of the nation’s leading multi-hazard risk reduction programs, which seek to secure the homeland from natural hazards. His oversight areas include the National Flood Insurance Program, National Earthquake Hazards Reduction Program, National Dam Safety Program and the National Hurricane Program.