Believe it or not, the official start of the hurricane season in the Atlantic basin is less than three months away. Now is a critical time for policyholders to review their policies with their agents to verify their coverage for flood, particularly if the property is located in a flood zone. Those in the Gulf Coast know all too well the vulnerability of coastal areas to hurricane storm surges. According to Jamie Rhome, leader of the National Hurricane Center’s storm surge unit, there are maps that measure regions of vulnerability with the question: “What is the worst-case potential for flooding possible due to a certain category of storm for this region?” These maps remind the public of the risk of living in coastal areas prone to storm surge.
Separate policies providing coverage for flood are available through the National Flood Insurance Program (“NFIP”) and can be discussed with your agent. The NFIP was created in 1968 to provide people with flood insurance through individual agents and insurance companies. The Federal Emergency Management Agency (“FEMA”) manages the NFIP.
Flood insurance covers direct physical loss caused by “flood.” In simple terms, a flood is an excess of water on land that is normally dry. The official definition of “flood” as used by the NFIP is:
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 from:
- Overflow of inland or tidal waters;
- Unusual and rapid accumulation or runoff of surface waters from any source;
- Mudflow; or
- 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.
A Standard Flood Insurance Policy is a single named-peril policy that pays for direct physical damage to insured property up to the replacement cost or actual cash value of the damages or the policy limit.
Policyholders need to be aware of the fact that general homeowners’ and hurricane policies typically exclude coverage for flood and they need to purchase this specific coverage for flood through a separate policy. Now is the time to have a meaningful discussion with your insurance professional to ensure adequate coverage for risk of flood loss. According to the NFIP, nearly 25% of all flood insurance claims come from areas with low to moderate flood risk. Do not risk being one of those consumers who neglects to purchase this valuable protection and regrets it later.