Many people make the mistake of assuming flood insurance comes with a homeowners insurance policy when it's actually an additional coverage. While most of the time, flood insurance is optional, in certain places, it's required. This is because those areas are at high risk for floods, while other areas may not be as susceptible to flooding. Homeowners often turn to private insurers or the National Flood Insurance Program (NFIP) for flood insurance, but if a customer wants or has a homeowners insurance policy with your agency, you can choose to offer them flood insurance as well.
Policies For Flood Insurance
Some policies concerning flood insurance include:
- Dwelling: This policy is for general homeowners/renters.
- General Property: General property refers to buildings that are not insured under RCBAP and are non-residential. This can include hotels, apartment buildings, dormitories, shops, schools, assisted living facilities and more.
- Residential Condominium Building Association (RCBAP): This provides coverage for residential condominiums. This is required in certain flood hazard areas and has its own requirements as to eligibility.
Different Areas Of Coverage
Some flood policies cover buildings and structures while others cover the insured's belongings. It's an important distinction to make, and one you should discuss with your clients.
- Building Coverage: Building coverage concerns the insured building and its foundation. Issues that deal with electrical/plumbing systems, furnaces, water heaters, refrigerators, and dishwashers are all considered beneath building coverage.
- Personal Property Coverage: Clothing, furniture, electronics, curtains, and the food in freezers are considered personal property.
When requesting flood insurance, your customers may not realize that certain policies may not cover their belongings. It’s important to have this conversation so they know what to expect with their policy in case of a flood. Also discuss with them the payment for the damage and whether they would like the replacement cost value or actual cash value. Which option they prefer may depend on the value of the items lost.
Items not covered in either of these coverages include:
- Damage from moisture, mildew, or mold
- Temporary housing or living expenses
- Property surrounding the insured building (hot tubs, trees, patios, etc.)
- Business interruption
- Most vehicles or vehicle parts
Who To Offer Flood Insurance
Every state in the U.S. is subject to flooding, and the danger increases every year. There's been a 20 percent rise in heavy rains in the past 50 years. This may not seem like a lot, but with the danger floods already pose, this increase can mean danger for ever more people. Some areas are more likely to undergo damaging floods than others. So, consider your customers' residences, the condition of their homes, and the history of flooding in their area. They may or may not be required to have flood insurance, but if they're near an area where flooding occurs often, it's most likely in their best interest to invest in flood insurance.
Facts To Know About Floods
Knowing the statistics about floods may help not only you but your client in making decisions about flood insurance.
- Average losses due to floods per year is around $10 billion
- Floods are the most common natural disaster in the US, even ahead of forest fires
- Over 25 percent of NFIP flood claims come from homeowners outside of areas with high risk
- Federal assistance for floods doesn't apply outside of designated federal disaster areas
- Flooding affected around 14 million people in 2019
- It may cost $25,000 to repair one inch of water damage in a home after a flood
- $135 billion in property may be threatened from chronic floods in the next 25 years
Floods are a large concern in the U.S. — even for those outside of high-risk areas. Discuss your customers' homes and residential areas. And help them find the best coverage for their home.