Homeowners with FHA Mortgages in RI now have more options when buying flood insurance
Rhode Island has beautiful coastal areas and rivers throughout its cities, and towns. Flooding is a part of life in Rhode Island. Providence, Warwick, and Kingston as well as other areas are at risk because of the coastline, major rivers, and larger urbanized areas. Historically, flooding has caused many federally declared disaster areas in the state. It doesn’t take more than one inch of floodwater to cause significant damage. Unfortunately, most homeowners’ insurance does not cover flood damage. Flood insurance is a separate policy that can cover homes, the contents of a home, or both, so it is important to protect your most important financial asset.
Until recently, Rhode Island homeowners with FHA mortgages located in flood zones could only purchase flood insurance through the National Flood Insurance Program (NFIP) managed by FEMA, limiting consumer choices. However, as of December 21, 2022, the US Department of Housing and Urban Development (HUD), through the Federal Housing Administration (FHA), will allow homeowners with FHA-insured mortgages to obtain flood insurance policies that conform to FHA requirements from private insurance providers. An update to the HUD’s new rule will significantly expand choices for FHA borrowers.
The National Association of Realtors celebrates this ruling because many private insurers now offer higher quality, lower cost options than the NFIP. In addition, NAR believes that FHA borrowers should not be excluded from options available to more conventional borrowers since 2019.
Because of this new rule, FHA loan holders can choose either flood insurance through the National Flood Insurance Program or the private flood insurance market.
Through its Climate Action Plan, the current administration believes that this will help borrowers who face affordability issues right now to get more affordable coverage or even enhance their coverage.
What are my options for purchasing flood insurance?
- The National Flood Insurance Program (NFIP) is the federal plan from FEMA. You can contact them directly, or your home insurance agent can process your application for a policy. NFIP must provide insurance to all applicants who live in participating communities.
- Private Flood Insurance is available from some insurance companies. However, they can be selective about who they choose to insure. Your home insurance agent may provide this insurance or can refer you to a provider. Your lender may also be able to make recommendations.
You must have flood insurance if you have a government-backed loan and live in a high-risk flood area in Rhode Island. As of December 21, 2022, you can choose where to purchase this insurance with the possibility of getting a more competitively priced policy. Contact your loan officer for advice on how to get flood insurance if needed.
