With the official start of the 2021 hurricane season rapidly approaching, flood insurance inquiries are surging in a red-hot real estate market. However, as many new and existing home and business owners gear up to shop for the policy that provides them the largest rate relief, it is imperative to understand the limitations of both standard NFIP flood insurance policies and many private flood insurance providers as well. Understanding these limitations and offering potential solutions to combatting out-of-pocket expenses will be key to retailers capitalizing on the flood insurance marketplace.
Very few home/business owners realize their true flood risk, let alone read their insurance policy, so it isn’t until they suffer a loss that the limitations of a standard flood-insurance policy present themselves. These coverage limitations lead to numerous out-of-pocket expenses that the policyholder is forced absorb, which becomes doubly frustrating to an insured who already thinks they shouldn’t have to carry flood insurance.
Education is key to avoiding frustration. Use the below list as a conversation starter to ensure your clients are aware of the limitations they face with a standard flood-insurance policy.
The length of this list is long and illustrates the dangers of simply going after the cheapest policy with flood. Whether home/business owners can understand their true flood risk or not, they should be aware of everything that would not be covered on traditional policies so they can make an informed decision about adding coverages or considering more robust products that are offered on the private market.
Paying less can wind up costing more when it comes to standard flood insurance. Familiarize yourself with the fine print so that you can educate your clients and help them protect what matters most.
One product that offers the most flexibility for helping a policyholder recover these “unforeseen” out-of-pocket expenses is called FloodFLEX and is available through Amwins and their subsidiary, TFIA (The Flood Insurance Agency). FloodFLEX is an additional loss settlement provision based on the building (Coverage A) claim amount after the application of the deductible. Offered as a percentage of the claim amount, FloodFLEX will pay out a separate and additional amount to the policyholder that can be applied to anything the insured wants, no questions asked!
For example: If the building suffers a $100,000 loss (after application of the deductible and any necessary depreciation expenses) and the policyholder had elected to purchase a 50% FloodFLEX endorsement, the insured would receive two separate payments: One payment for the $100,000 loss to the insured’s building and a second payment for $50,000 that can be applied to anything, from paying down the deductible, to loss of use of the building, business interruption, loss of rents, repairing a seawall, repairing their fencing or landscaping, or - if the insured was lucky enough to limit their out-of-pocket expenses - they can put the money in the bank! It truly is the policyholder’s money and they can use it in any way they see fit!