What's Covered and What Isn't
Susan Bernstein, FEMA
Sometimes it’s the “little
questions”—about matters we, who work in flood insurance, assume are clear—that
worry policyholders the most. Often, these are the questions your client may
have the greatest trouble conveying to you.
Where does homeowners insurance stop and flood insurance begin?
Answering this question has
to do with water and the National Flood Insurance Program (NFIP) definition of a
flood. Explain that the policy defines a flood as:
1. A general and
temporary condition of partial or complete inundation of
two or more acres of normally dry land area or of two or more properties (at
least one of which is your property) from:
a. Overflow of
inland or tidal waters;
b. Unusual and rapid
accumulation or runoff of surface waters from any source;
c. Mudflow;
2. Collapse or
subsidence of land along the shore of a lake or similar body of water as a
result of erosion or undermining caused by waves or currents of water exceeding
anticipated cyclical levels that result in a flood as defined . . . above.
One of the key elements of
this definition is the area the water covers—two or more acres of normally dry
land area or two or more properties. At least one of the flooded properties must
be the policyholder’s property, of course.
Homeowners insurance policies
rarely cover any flood-related damage. However, sewer backup is one of the only
“water-related” conditions for which homeowners insurance may offer some
coverage. The property owner may have (or be able to get) sewer coverage in a
homeowners policy. If it is not specifically covered, the homeowner may be able
to obtain some kind of rider attaching sewer coverage to the homeowners policy.
Homeowners should talk to the agent who sold them the homeowners policy if they
are wondering about the rider.
The NFIP generally does not
cover sewer backup, since sewer backup in a home or business rarely covers two
or more acres or properties. However, if sewer back-up is a result of a general
condition of flooding, it is covered by the NFIP.
The only way to insure
against flood damage is with a flood insurance policy. Agents should explain to
their clients that flood insurance coverage is actually quite broad. WYO
Companies can provide a summary of coverage, or you can find it in the
FEMA online library
[www.fema.gov/library/viewRecord.do?id=3011].
Does flood insurance cover a
leaking appliance or appliance hose?
The NFIP flood insurance policy does not
cover leaks from internal sources. This damage is covered by many homeowners
policies. The NFIP was created to provide protection from natural disaster-type
flooding from external sources. Talk to your clients about what is covered by
homeowners insurance. Even if they have a policy with another insurance agent,
you can offer a clear answer to their questions, since they may not be getting
the clarity they need from their other agent. This could be an opportunity to
show them you can help.
I live in a condominium; do I need
flood insurance?
Boards of
Directors of condominium associations are usually responsible for maintaining
all forms of property insurance including flood insurance. Very often the
association will purchase a Residential Condominium Building Association Policy
(RCBAP), which covers the entire residential condominium building, including
both common building elements and individually owned building elements within
the units, improvements within the units, and personal property owned in
common. Unit owners, however, would still need their own NFIP policy to cover
their individually-owned personal property.
Associations
do not always purchase enough insurance, and in the event of a major flood they
may need to levy assessments
against the individual unit owners to help pay to repair damages. A unit owner
can acquire supplemental building coverage to the RCBAP by purchasing building
coverage under an NFIP Dwelling Form that is written in excess of the
association policy. The Dwelling Form policy purchased by the unit owner may
respond to shortfalls on building coverage pertaining either to improvements
owned by the insured or to assessments. It should be noted that the Dwelling
Form does not extend the RCBAP limits, nor does it enable the association to
fill gaps in coverage resulting from its coinsurance penalty and deductible.
Whether unit
owners live on a lower floor or an upper floor, they should talk to an insurance
agent about getting NFIP coverage.
Remember, if you are an NFIP stakeholder, chances are good that property owners
are looking to you to explain their insurance policies and assist them. To
consumers, you are the expert. An NFIP refresher course is only a few computer
mouse clicks away, and it only takes a few hours to complete the NFIP Basic
Agent Tutorial, which is available to registered users in the training area of
the
NFIP Services
[www.nfipbureau.fema.gov/training/index.html] website.
Susan Bernstein is the Editor of
Watermark. She also
works with NFIP regulation issues and the FloodSmart “Ask the Experts” mailbox.
