Real Estate and Private Flood Insurance: What Realtors Need to Know

Buying a home is one of the largest financial investments a person will make in their lifetime and a decision that requires careful thought and planning. Potential home buyers may consult a Realtor to guide them through the process and ensure their investment isn’t something they will come to regret.

Realtors are often obligated to inform their clients of potential risks when buying a home, including whether or not a property has lead paint, termites or potential flood risk. And as this year has shown, whether its location is inland or on the coast, virtually any property has some degree of flood risk. For knowledgeable real estate professionals, this is an opportunity to stand out among their competitors by providing valuable counsel to clients on an often-overlooked aspect of the homebuying process – flood insurance.

As we’ve mentioned before, flood damage is not covered under most homeowners’ insurance policies. Whether or not a client’s anticipated residence is located in a Special Flood Hazard Area (SFHA), they ought to consider purchasing flood insurance to protect such an enormous investment. Often, homeowners are able to find flood insurance policies offered by the federal government through private insurers. While this government sponsored flood insurance provided by the National Flood Insurance Program (NFIP) has real value, a knowledgeable Realtor will offer their clients more than one option. Unfortunately, most homebuyers – and many Realtors – are unaware that other flood insurance options exist beyond the NFIP.

As a Realtor, being able to steer clients to a superior, more cost-effective and comprehensive flood insurance option is an added value that can improve client retention and attract prospective clients. It starts with gaining an understanding of all the benefits the private flood insurance market has to offer and discovering where to access the broader coverage and lower prices often available through private flood insurance coverage.

Homebuyers are already spending hundreds of thousands of dollars and will be looking to save money wherever they can. Recommending a more affordable option for the flood insurance they’ll need, which could also provide greater protection for their investment, is a simple way for Realtors to demonstrate their expertise of the entire homebuying process and shows that they are truly looking out for the best interests of their clients.

Here are some ways Realtors can educate themselves on flood insurance options for their clients and demonstrate this added value:

• Stay up to date on flood mapping changes and flood hazard zone classifications.

• Contact the local Realtors’ association to learn more about specific flood zone disclosure requirements, as they can vary by state.

• Talk to a private flood insurance specialist to understand the benefits of private flood coverage, including: higher policy limits, lower rates, coverage for basement contents, additional living expenses and more.

• Read up on waiting periods and understand that NFIP flood insurance policies require a 30-day waiting period, while policies written through the private market can contain waiting periods as brief as 15 days.

Private flood insurance continues to gain ground. This November, the Federal Housing Administration has indicated its intention to accept private flood insurance policies for properties insured by the FHA located in FEMA-designated flood zones. Consumers who don’t yet know about private flood insurance soon will, and Realtors will want to be prepared to answer their questions.

Real estate is a competitive industry, and real estate websites like Realtor.com are just beginning to include flood risk information for their listings. Realtors with insight about flood insurance stand out among their peers and can provide solutions for flood insurance their clients may not have even been considering. More importantly their knowledge demonstrates that they care, which could be the difference between earning new business or just being another real estate agent.