Q&A: why does all insurance companies exclude flood coverage?

Question by : why does all insurance companies exclude flood coverage?
why does all or most insurance companies exclude flood coverage from a fire insurance policy when the client is not in a flooding zone and the risk of fire or theft is much more than having a flood in that area?

Best answer:

Answer by Judy
It’s sold as a separate policy. See http://usgovinfo.about.com/od/consumerawareness/a/floodfacts.htm for info.

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One Response to “Q&A: why does all insurance companies exclude flood coverage?”

  1. Casey Y says:

    Flood coverage in the US is purchased through the National Flood Insurance Program. The NFIP is part of FEMA. The idea here is that those in high flood zone areas would not be able to purchase the insurance if sold through open markets, because it would be too expensive. Basically, the NFIP subsidizes people who live in risky areas.

    The government also fears a catastrophic loss (like a hurricane) which might put insurers out of business, resulting in unpaid claims.

    Regular companies would love to write this stuff, but their prices would be more in line with the actual premium and not the amount which is subsidized by the government.