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Flood Insurance

Frequently Asked Questions

Q. Is flood insurance intended to restore a loss to its pre-flood condition?

A. Flood insurance is intended to restore a covered loss to its pre-flood condition, less the deductible. Excluded items, such as a pier, landscaping, etc. are not covered under the current policy.

Click here for additional documents and video regarding policyholders' rights to be restored to their pre-flood condition.

Q. Is flood insurance paid for by tax dollars?

A. No. Flood insurance premiums are paid by policy holders. In the event NFIP needs to pay out more than the premiums it has collected, the NFIP has the authority to borrow up to 1.5 billion dollars from the U.S. Treasury. All such loans must be repaid with interest.

As of September 2004, NFIP public records indicate that the program is currently more than 1 billion dollars in the black.

Q. Is flood insurance a form of federal aid?

A. No. Some flood trainers have this misconception and have errantly trained adjusters and agents.

Q. Does flood insurance cover contents?

A. Only contents coverage is specifically purchased. Unlike homeowners insurance that covers the dwelling and the contents, the current flood policy covers only the structure unless contents coverage is elected. Your declaration page will state the limits of coverage.

Q. What is the minimum deductible that can be carried?

A. Page D-11of the FEMA NFIP Seminar Forms Kit specifies that single family and 2-4 family building and contents policies may carry a deductible as low as $500 for structure and $500 for contents to as much as $5,000 for structure and $5,000 for contents.

Q. Who does my adjuster actually work for?

A. The majority of catastrophe adjusters are independent contractors working for third party adjusting firms. These firms operate similarly to temporary agencies.

Q. If my adjuster is getting paid a percentage of the claim, why would a settlement ever be low?

A. We have statements from adjusters, examiners and other industry insiders that describe their compensation quite clearly. Catastrophe adjusters handle multiple perils, not just flood. The third party adjusting firms, according to industry insiders working with us, make clear the adjusting firms recurring business is dependant keeping loss payout for the carriers as low as possible.

Q. But flood insurance settlements are not coming out of the private insurance carrier’s pocket. So why would the private insurance companies concern themselves with loss payout?

A. Several reasons. First, the adjuster is not necessarily adjusting only flood losses. In many cases the loss will consist of flood and wind. Although the flood loss is not coming out of the carrier’s pocket per se, the wind loss is.

Let’s say the going rate for sheet rock is $2.00 per foot. If the adjuster paid the proper rate on the first floor, and paid a reduced rate, say $1.46 on the second floor where a tree fell through the roof, the disparity would likely be obvious to the homeowner and the contractor. On the other hand, if the adjuster confidently states that the going rate is $1.46, all is well … for the adjuster, the third party adjusting firm and the carrier. The problems only start much later as repairs get underway. By that time the adjuster is miles away. The adjuster gets paid for his or her work, the insurance company gets a percentage of the claim from NFIP for its extra work handling the claim, and the policyholder is shortchanged.

There are other reasons as well. For additional information refer to Price Guidelines.

Q. Do State Insurance Commissioners have any authority over flood adjusters?

A. Different commissioners take different positions, however, it is interesting that even those states that claim to not have any jurisdiction require the adjusters to be licensed or otherwise registered with their department.

In the case where an adjuster has been accused of some sort of wrongdoing, some commissioners will take the position they can request a review of all of the adjuster’s files. In other words, they will review wind claims for example to determine if the same types of issues are present.

Q. What can be done if an insurance company sends an engineer to inspect the loss, and the engineer seems to be purposely minimizing the damages?

A. Structural engineers must hold a license in each state they work in. Complaints can be made with the insurance commissioner, engineering board and FEMAINFO.US. Complaints can also be made in other states where the engineer holds a license.

Q. Does FEMAINFO.US track engineering complaints?

A. Yes.

Q. Does FEMAINFO.US track adjuster and carrier complaints?

A. Yes.

Q. Aren’t some adjusters actually trying to help the policyholders?

A. Absolutely. As in all professions, in adjusting there are good, average, mediocre and poor adjusters. One perception held by seasoned adjusters is adjusters who only adjust flood losses are generally less experienced than adjusters capable of adjusting multiple perils. Lack of experience is generally the most likely source of problems.

Q. My adjuster told me he has specialized training from the NFIP and is flood certified. What does that mean?

A. The NFIP holds trainings generally outside of the hurricane season. Adjusters report that these training are comprised of poor quality trainers that attempt to describe coverage limitations.

Q. But what about specialized training whereby the adjuster learns about structural damage caused by hydrostatic pressure, mold and fuel oil contamination, sewage contamination, corrosion, moisture damage and other water related losses. Does the NFIP provide this type of training?

A. No. According to many adjusters that have attended the trainings, such topics are not covered.

Q. If the adjusters don’t receive any specialized trainings, why do they attend?

A. To maintain their flood certification license. Without it, they are not permitted to handle flood losses.


If you have a question that is not answered here, please click here to contact us.

Last Modified: 060806 1313

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