Flood insurance confuses even the most seasoned insurance professionals. Flood is a most damaging, yet predictable peril.
Floods occur faster and more powerfully now since so much area is paved with impervious surface and graded to drain quickly and efficiently. Local streams swell immediately.
The hundred-year floodplain is generally a decade or two behind this development curve. Even with storm retention facilities built into new larger projects, the release is measured as a ten-year storm. So, every intense storm becomes more than naturally intense. The flood peril will only get worse.
The Standard Flood Insurance Policy General Property Form (commercial properties and residential with greater than four family units) offers two coverage limits:
1. Building property – $500,0002. Personal property – $500,000
Valuation of damage is based on actual cash value; that is, replacement cost less depreciation.
According to the Federal Emergency Management Agency (FEMA), flood means an overflow of inland waters, tidal waters, unusual or rapid accumulation of runoff, mudflow, or collapse of shorelines or banks due to erosive forces of floods or waves.
According to FEMA, mudflow means a liquid river of flowing mud on the surfaces of normally dry land. It does not include landslides, slope failure or saturated soil movements.
Flood insurance only covers this narrowly defined peril.
Deductibles apply to buildings and personal property separately, and contents coverage is never included in building coverage. The two may be on the same policy, but they stand alone as losses, valuation including deductible, and limits.
Building coverage includes permanent machinery, like HVAC systems, pumps, built-in cabinets, water heaters, awnings and canopies, and permanently attached antennas. Business interruption and loss of income are not covered.
Personal property does not include currency or precious metals, coin or stamp collections or stock certificates, vehicles, or ensuing mold or mildew without insured mitigation of potential loss.
Increased Cost of Compliance (ICC) coverage helps defray the cost of relocating or restructuring the dwelling to bring the dwelling to current community building standards in a flood zone. It is an add-on coverage.
ICC is limited to $30,000 and the building claim amount is limited to $500,000 with both coverage limits included.
Ask your insurance professional about flood insurance. It may reduce your losses substantially.