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By Venee Galloway, CPCU and Jimmy Norton, CPCU
A water loss to your home or business can be devastating. The Federal Emergency Management Agency (FEMA) says that just 1 inch of water can cause $25,000 worth of damage. Their Cost of Flooding Tool illustrates how the cost increases as the water rises.
Many think that they aren’t at risk for a flood loss, but water can come from many different sources. This video from Channel 6 in Philadelphia shows how one water main break affected many homes along a city street.
We have seen an uptick of “100 year storms” over the last decade. In fact, 90% of natural disasters in the US involve some form of flooding. In the wake of Hurricane Ida, New Orleans once again suffered extensive damage to hundreds of its homes and businesses.
Water losses like these are not covered by standard insurance. Property policies exclude damage caused by flood, surface water, ground water and drain backups. Unfortunately, many of us don’t realize this until it’s too late. Flood insurance will help to cover these losses. Most flood insurance is written through the National Flood Insurance Program or NFIP, which is managed by FEMA. These policies provide important coverage, but they do have their limitations. For example, NFIP Flood policies include a very specific trigger: a flood is an excess of water on land that is normally dry, affecting two or more acres of land or two or more properties. This means that a flood has to impact more than just you (unless you have more than 2 acres) in order to be covered.
The policy is broken into 2 parts: the first for coverage of the Building structure and all permanently affixed items (i.e. appliances, windows, etc.) and the second for the Contents within, such as furniture and computers. However, the maximum limits available under the NFIP are:
Commercial properties: $500,000 for the building and $500,000 for contents
Residential properties: $250,000 for the building and $100,000 for contents
The NFIP also requires a waiting period of 30-days before the coverage can begin, unless the coverage is required by your bank. In order to close gaps in the NFIP for larger exposures, excess coverage limits can be purchased in the private insurance market. Some carriers will also add Flood coverage to Property policies for larger buildings.
Floods can affect us all, and Flood insurance should be heavily considered regardless of your proximity to water. In the event that you do not currently have this coverage and are not sure if it makes sense for your business, please reach out to Brock-Norton for a free risk analysis.