The 411 on Flood Insurance

With flash floods in Utah, Joaquin smashing the East Coast, and more expected to follow, it might be time to check your properties insurance for flood coverage.

Floods cause, on average, $50 billion in damages each year in the United Sates. This makes flooding not only the most common, but the most expensive natural disaster as well. The tropical moisture associated with Hurricane Joaquin, in South Carolina alone, is predicted to cause $1 billion in property damages.

Unfortunately for property owners, flooding is not covered in standard property insurance policies, resulting in significant out-of-pocket expenses. Even when the properties are covered, failure to structure the policies and coverage to the properties unique circumstances cause underinsured exposures.

Overall, there are four flagged flood-related challenges, and solutions, that businesses face.

Changes to Flood Zones during Policy Year
Flood zones change over the course of a policy year, putting the property at risk of being underinsured for the new flood level. Certain areas may also see a rise in deductibles when they are put into a high hazard flood zone.

Reduced Coverage Due to Broad Definition of Flood
Some off-the-shelf policies have broad definitions of insurance which allow certain non-flood events to be classified as a flood. When this happens coverage is reduced and deductibles are increased.

For general purposes, make sure your policy has a narrow flood definition like: “The rising and overflowing of a body of water onto normally dry land.” This straightforward language can have a significant financial impact.

Language Excluding Interior Water Damage
Certain policies exclude losses from interior water damage following severe storms or heavy rains. This wind driven rain coverage exclusion typically occurs when proof of exterior damage is lacking. To avoid this significant coverage gap, simply remove this exclusionary language from your policy.

Properly Quantify Flood Risks and Setting Limits
Get an estimate of the potential cost of damage from flood. This allows you to get the correct amount of coverage to protect your home and belongings.

No amount of preparing can flood-proof your home, as millions of property owners discover for themselves each year. However, adding flood insurance to your policy can allow you to rebuild.

Nick Puhala is Vice President and Savannah market leader at USI Insurance Services, a leader in insurance brokerage and consulting in property-casualty, employee benefits, personal risk services, retirement, program and specialty solutions.

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