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Flood Insurance is Good to Have, But Not Great

When Super Storm Sandy that hit Long Island in October of 2012, over 150 of our clients suffered a loss on the same day. Needless to say, the effects of that storm were devastating. Nobody really came away whole. Surprisingly, while Flood Insurance helped, it was far from the great coverage our clients expected.

Don't get me wrong, this blog is not to suggest that Flood Insurance isn't a vital coverage! Without a doubt, those clients with Flood Insurance during Super Storm Sandy fared far better than those who didn't. I could give example after example of how Flood Insurance literally saved businesses and families. Flood Insurance provides some vital coverages that a business or a family needs. What I want to do, is point out the limitations of Flood Insurance so you, the educated consumer, is prepared.

What is a Flood?

In simple terms, a flood is an excess of water on land that is normally dry. The official definition used by the National Flood Insurance Program is: “A general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or 2 or more properties from:

  • Overflow of inland or tidal waters
  • Unusual and rapid accumulation or runoff of surface waters from any source
  • Mudflow
  • Collapse or subsidence of land along the shore of a lake or similar body of water as a result of erosion or undermining cause by waves or currents of water exceeding anticipated cyclical levels that result in a flood as defined above

What does Flood Cover:

The insured building and its foundation

    • Electrical and plumbing systems
    • Central air conditioning equipment, furnaces and water heaters
    • Refrigerators, cooking stoves and built-in appliances such as dishwashers
    • Permanently installed carpeting over unfinished flooring
    • Permanently installed paneling, wallboard, bookcases and cabinets
    • Window blinds
    • Detached garages (up to 10 percent of building property coverage); detached buildings (other than garages) require a separate building property policy
    • Debris removal

    Personal Contents Property:
  • Personal belongings, such as clothing, furniture and electronic equipment
  • Curtains
  • Portable and window air conditioners
  • Portable microwave ovens and portable dishwashers
  • Carpets that are not included in building coverage
  • Clothing washers and dryers
  • Food freezers and the food in them
  • Certain valuable items such as original artwork and furs (up to $2,500)

Limitations of a Flood Policy:

While the above coverages are good, they are limited. Here are some things that are very limiting on a flood policy:

  • Building Coverage is available for a maximum $250,000 on Homeowners and $500,000 for Businesses
  • Contents Coverage is available for a maximum of $100,000 for Homeowners and $500,000 for businesses.
  • Contents Coverage is settled on an ACV (Actual Cash Value) basis. That means they deduct for depreciation. Replacement cost coverage is not available on a flood policy.
  • Flood Coverage excludes Additional Living Expense for Homeowners. That means hotel expenses and meals while your house is uninhabitable are on you.
  • Business Interruption is excluded. If you suffer a flood and are closed for a period of time, flood insurance will not pay continuing expenses and lost profits.
  • Flood excludes virtually anything below ground level. All your stuff in the basement with very few exceptions are excluded. If you know a big storm is coming, move the expensive stuff upstairs.
  • Plants, Trees, and Shrubs are excluded. That beautiful backyard you just shelled out $20,000 to landscape has just been washed away. Sorry, flood insurance won't help you.

Flood insurance is fairly inexpensive considering the risk. In fact FEMA is loosing a great deal of money on flood insurance. They are paying more dollars in claims than they take in premiums. This is mainly a political decision. After Sandy, they were threatening to raise rates but put that on hold. You do, however, get what you pay for. As you can see from the above list of limitations, Flood Insurance is good to have, but not great!

Have questions about Flood Insurance? Give us a call at 888-997-9801 or check out our website by clicking here We're here to help.

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