By: Janet Srock, AAI, CISR, Commercial Lines Account Manager
A couple of weeks ago I wrote about the devastation that hurricane season, which started on June 1, can cause for both families and businesses. At SIA Group, we cannot understate the importance of both purchasing and understanding your flood policy. Forecasters are again predicting an increase chance of hurricanes, so let’s try and be prepared before the first storm strikes.
The following information outlines some of the important aspects you need to understand about this oftentimes misunderstood coverage:
- You can only purchase flood insurance through the National Flood Insurance Program (NFIP) or one of the Write Your Own (WYO) carriers, which our agency has available for our insured’s needs. A single hurricane event can cause hundreds or thousands of individual losses both to homes and businesses. The National Flood Insurance Program was adopted in 1968, to provide for the following:
- To provide insurance coverage for property damaged by flooding.
- To encourage communities to implement practices for buildings and land use methods that help to mitigate (eliminate) damage from flood.
- This insurance covers direct physical loss to property that is insured for flood and will cover reasonable expenses for sandbags, construction materials and human labor in the handling of the materials that are used to minimize damage to flood-imperiled property. The reimbursement for labor uses the federal minimum wage. The maximum amount payable is the minimum building deductible amount applicable.
- The Standard Flood policy is designed for 1 – 4 family residences and their contents; tenant’s personal property and residential condo-unit owners. For condo-unit owners, coverage can be for the individual owner and the common areas (areas that are used by all condo-unit owners). There are flood policies available for the condo association’s residential condo buildings and for non-residential businesses.
- There are also Preferred Risk policies for 1 – 4 family residential buildings that are located in Flood Zones B, C or X. This form is not available for condos.
- Waiting Periods: For obvious reasons, the NFIP has set up 30 day waiting periods for the purchase of flood insurance, however there are some instances in which this waiting period is waived. To learn more about the exceptions, contact your agent.
- Exclusions: Some exclusions on this policy include, but are not limited to: theft, loss of profits, fire, windstorm, explosion, earthquake, land sinkage, land subsidence, landslide, and land movement except for mudslides or erosion, which is covered under the flood peril. There are other exclusions as well that are noted within the policy documents.
- Cancellation: An insured can cancel a flood policy at any time, although unlike other policies, there is no return premium, as flood premiums are fully earned.
- Direct Government Insurance (Flood) – The government, using the Federal Emergency Management Agency (FEMA), provides flood coverage. It combines insurance with mandated risk management to help communities in flood-prone areas to mitigate flood losses. FEMA enforces compliance with this mitigation by withdrawing federal assistance if these mitigation techniques are not implemented, which will result in homes or businesses not being able to purchase insurance.
- Cost of Flood Insurance: The cost of flood insurance is based on many factors, including the communities themselves that are required to document their vulnerability to flood by flood mapping, or the analysis of how likely a community can flood, and to create and maintain preventative measures that help to mitigate damage to property when flooding occurs. Keep in mind that the severity of large hurricanes, such as Super Storm Sandy, Hurricane Hazel and others, all contribute to the rise in flood insurance costs, as billions of dollars are spent on these types of losses to protect our homes and businesses.
Contact SIA Group and your producer or account manager to discuss this valuable type of insurance and how we can assist your homeowners or business needs.