Every flood insurance policy should include nine key coverages to better safeguard their property and possessions against the financial impacts of flooding. Additionally, regularly reviewing and updating their coverage as needed can help ensure they remain adequately protected as circumstances change.
1. Building Property Coverage
This coverage protects the physical structure of the property, including the building foundation, walls, roof, electrical and plumbing systems, HVAC equipment, appliances, flooring and built-in fixtures like cabinets and countertops. It helps cover the cost of repairs or rebuilding in case of flood damage.
Make sure the coverage amount reflects the full replacement cost of your client's property.
2. Contents Coverage
Contents coverage safeguards personal belongings inside the insured building, including furniture, electronics, clothing, appliances and other personal items. This coverage helps cover the cost of replacing or repairing damaged items.
Have your clients take inventory of their possessions and estimate their value to determine the appropriate coverage limit.
3. Additional Living Expenses Coverage
If floods damage makes your client's home uninhabitable, Additional Living Expense (ALE) coverage helps cover the costs of temporary housing, food, transportation and other necessary living expenses while the home is being repaired or rebuilt.
"Additional Living Expenses, or Time Element coverage, is an often-overlooked element of coverage. The National Flood Insurance Program does not provide coverage for Time Element exposures, so insureds often need to look to the private market for this coverage," says RPS's Nick Orf, area assistant vice president — Flood.
4. Basement Coverage
Since basements are particularly vulnerable to flooding, include coverage for basements, including the structural elements and contents stored within. Some policies may have limitations or exclusions for basement coverage, so review the terms carefully.
5. Increased Cost of Compliance Coverage
Increased Cost of Compliance (ICC) coverage helps with the costs associated with bringing the property into compliance with current building codes or ordinances during the repair or rebuilding process. This coverage can help cover expenses such as elevating the structure, relocating utilities and mitigation measures required by local regulations.
6. Debris Removal Coverage
This coverage helps cover the cost of removing debris caused by flood damage from the property. It includes the removal of damaged structures, materials and other debris that may pose a safety hazard or hinder the restoration process.
RPS's Orf says, "Insureds often underestimate the potential costs associated with debris removal, especially in the event that a property is required to be demolished, so it's important to make sure that this coverage amount is adequate."
7. Coverage for Detached Structures
If the property includes detached structures such as garages, sheds or fences, make sure the policy extends coverage to these structures as well.
8. Replacement Cost Coverage
Opt for replacement cost coverage rather than actual cash value (ACV) coverage whenever possible. Replacement cost coverage reimburses the full cost of repairing or replacing damaged property without deducting for depreciation, providing more comprehensive protection.
9. High-Value Items Coverage
If your client has valuable items such as jewelry, art or collectibles, consider adding additional coverage or purchasing a separate policy endorsement to ensure these items are adequately protected in the event of a flood.
