BROKER FEES AS THEY RELATE TO THE FLOOD INSURANCE INDUSTRY.
What is a broker fee?
It is an additional fee charged by your insurance broker if they perform services above and beyond the normal placement of a policy.
Are Flood Insurance Broker Fees Necessary?
The short answer is NO, you should not have to pay a broker fee. All of the current flood insurance carriers have standard applications and this falls in line with the ordinary quote process and the placement of a policy. The carriers pay the brokers commissions.
What About One Time Up Front Fee’s?
This is a big rip-off. We have heard horror stories of brokers charging as much as $300.00 for a one time up front placement fee and of course it is non-refundable fee in the event you cancel. What this tells us is that your agent/broker makes all their money up front and could care less if you move your policy next year for better rates. Why would they care they have made 3 to 5 years commission on you upfront already.
“Broker fee mills” as we refer to them often do not disclose the fee until the last minute when the pressure is on to place the insurance and close the deal. This is a “Bait and Switch” tactic often used by unscrupulous brokers.
YOU CANNOT ARBITRARILY CANCEL A FLOOD INSURANCE POLICY
If you have a federally backed mortgage (99.9% Do) you are required to purchase flood insurance. When flood insurance is mandatory it becomes a compliance issue with your lender and you cannot just cancel the flood insurance policy, you must have a valid reason to do so.
There are a number of valid reasons established by the National Flood Insurance Program and take up about 12 pages in the flood manual.
In almost every case you will be asked to produce proof documents from the lender to cancel. Don’t fight it and please do not shoot the messenger. Without the support documents your policy will not be cancelled.