...result of erosion or under- mining caused by waves or currents of water exceeding anticipated cyclical levels that result in a flood as defined.
All property owners should be keenly aware of any risk of flood that may exist for them. According to FEMA, one-third of the NFIP’s claims come from outside the designated high-risk flood areas. Of the approximately 10 million properties in so-called Special Flood Hazard Areas — the most vulnerable to flood — no more than a quarter are covered by flood insurance. Yet, in these special hazard areas, a building has a 26 percent chance of suffering flood damage during a 30-year period, compared to a 9 percent chance of fire.
The NFIP contracts with many insurance companies to sell flood insurance. The insurance company receives only a small portion of the premium and generally contracts out the adjusting of flood claims to independent adjusters. These adjusters, sometimes called “storm troopers,” follow storms and floods spending a great deal of time on the road traveling from disaster to disaster.
All NFIP policies have the same language and will have the same rates, regardless of the insurance company from which they are purchased. With this standard pricing, it is wise to buy from an insurance company that has a history of fairness and good service with their regular policy settlements. Companies will tend to be as liberal or as conservative with their NFIP policies as they are with their own policies. A company that generally provides the poorest payouts with its regular work will most likely adjust its flood losses the same way, even though the premium rate is the same no matter which company provides coverage.
There are three NFIP policies available: commercial property, condominium property and dwellings and their contents. In addition, the Insurance Services Office (ISO) introduced an endorsement, CP 10 65, which can be used with general lines policies either on an excess basis over NFIP policies or, for businesses not subject to NFIP coverage, on a primary basis.
Among the key coverages offered with the flood policy are: building, personal property, debris removal and increased cost of compliance.
Building coverage applies to the building structure itself, with some exceptions and extensions. This coverage extends to fixtures, machinery and equipment within the building, and includes a long list of specific property items, including for example: awnings and canopies, fire sprinkler systems, venetian blinds, ventilating equipment and permanently installed wall mirrors.
Since no definitions are offered for most of these items, controversy often can occur between policyholders and the companies’ adjusters over the existence and extent of coverage. Also included under building coverage are materials and supplies for use in constructing, altering or repairing the building while stored in a fully enclosed building, on the premises or on an adjacent property; and buildings in the course of construction before being walled and roofed. Certain conditions apply to each, which should be checked before relying on coverage for any item.
NFIP coverage for personal property applies to property inside a fully enclosed insured building. Unlike most property insurance policies, there is no coverage for property in the open or in vehicles on or near the premises. The policy provides for either household...