What does the term "excess losses" refer to in relation to flood insurance policies?

The term "excess losses" in the context of flood insurance policies refers to losses that are covered by the federal government. This indicates that when the financial impact of flood-related damages exceeds the limits of a typical insurance policy, these excess losses can be addressed by federal programs, such as the National Flood Insurance Program (NFIP). This is particularly relevant during significant flooding events where the extent of damage surpasses customary policy coverage.

Understanding the role of the federal government is crucial, as ordinary insurance policies may not cover these extreme losses, leaving individuals, communities, and organizations at risk. By having the federal government step in to cover these excess losses, policyholders can receive financial relief when faced with catastrophic flood events, which might greatly surpass any limitations set by their standard insurance coverage.