Your home insurance clients will trust you to handle their policy needs and explain all of the different benefits that their coverage can provide. As their agent, it is your duty to help them optimize their coverage to their advantage and to explain to them situations where they might need extra coverage in order to fully protect themselves.
One of the situations where customers might need expanded coverage is when it comes to flood risks. Most people don’t realize that flooding is not covered by standard homeowners insurance, but instead by separate flood insurance. The flood insurance marketplace is tightly regulated, and most policies are provided by the National Flood Insurance Program (NFIP). Therefore, not only are policies essential for those who live in areas that are at risk of flooding, they also are required of many.
It is critical for your clients to understand how flood insurance works and why they need it. Below, we’ve outlined a few common questions that clients frequently ask agents about flood insurance, along with the answers to them.
Question 1: Does Home Insurance Cover Water Damage?
On one hand, homeowners insurance will cover certain unpreventable, unavoidable water damage hazards. For example, burst pipes are usually covered, and policyholders can file a claim against your dwelling coverage or possessions coverage for the qualifying damage. Additionally, if a client wants extra water damage coverage, then they might be able to buy endorsements that cover sewer back-ups, sump pump failures and similar internal issues.
However, flood damage is a different story. Homeowners insurance policies do not cover damage from a weather-related flood. These floods might be anything from flash flooding to river swells and storm surge. The only exception might be if a tree falls on your roof in a storm and rainwater enters the home.
Question 2: Where Do I Get Flood Insurance?
Any home can flood, even those that sit on high ground, or away from bodies of water. As a result, almost anyone can benefit from flood insurance. Still, the need is critical for others.
Flood insurance is generally not underwritten by major insurance carriers. The disproportionate amount of risk associated with this hazard makes it hard for them to do so. As a result, the government-backed National Flood Insurance Program is the primary supporter of most flood insurance plans issued within the United States.
An NFIP plan can be purchased either directly from the program itself, or through one of the major insurers who have contracted with the program to offer these benefits. If you are part of an agency that provides these carrier-offered policies, then you will need to explain to your clients that these policies are still subject to NFIP regulations even though they come from a national insurance brand.
Question 3: What Does Flood Insurance Cover?
Because they are subject to government regulations, NFIP flood plans are very precise. They provide two types of benefits:
Dwelling Insurance: Coverage pays for damage to your house itself, and can pay for structural damage, damage related to mold or rot. Carpeting, wood finishes and certain appliances are included in this coverage.
Possessions Insurance: Your belongings in your home will have coverage, and the policy can pay to help you repair or replace them, up to a limit.
Other benefits can help with the costs of cleanup & debris removal, costs of bringing your home up to code, and costs to upgrade the flood avoidance measures around the home.
However, there are strict limits on the assets that these benefits will cover. For example, coverage will never pay for damage to outside shrubbery or landscaping. In finished basements, coverage can pay for certain items inside, but it will not cover structural damage. Possessions such as outdoor appliances, high-value jewelry and other unique assets might have limited benefits or be excluded from coverage.
Question 4: What Limits Are Available on NFIP Policies?
All NFIP policies will be subject to coverage limits. Homeowners can buy a maximum dollar amount of possessions and dwelling coverage worth:
- One- To Four-family Residential Addresses: $250,000 Structure/$100,000 Contents
- Other Residential Buildings: $500,000 Structure/$100,000 Contents
Clients who live in high-value homes or have expensive belongings might not find the benefits of an NFIP policy right for them. However, there are certain private flood plans on the market that might help cover these costs.
Question 5: Am I Required to Buy an NFIP Plan?
Communities throughout the United States participate in the National Flood Insurance Program, which enables their residents to buy these plans. In return, communities help the NFIP collect flood data and designate which pieces of land are at the highest risks of flooding.
When communities and the NFIP designate an area as a high-risk flood zone, then residents of that zone usually must buy flood insurance. NFIP regulations require it if the resident either has a mortgage on their home or has ever received federal disaster assistance.
Also Read: Explaining the Exclusions of Flood Insurance to Clients?