Flooding: Everyone is Exposed, Few are Insured, But New Options Entice
4 ADJUSTINGTODAY.COM Since it was long believed that flood was uninsurable in a private voluntary market, NFIP policies were developed independent of standard property policies. Consequently, NFIP policy provisions do not always conform to or complement provisions in property policies from private insurers. In contrast, flood policy forms developed by ISO in 2017 and 2018 utilize provisions similar to those included in ISO-based homeowners and commercial property forms. Thus, the NFIP and ISO flood forms differ in several ways. Differences Both the NFIP and ISO forms essentially define a flood as the overflow or inundation of surface waters, plus any mudslide that results. The NFIP definition includes an important qualification, however: To trigger coverage under an NFIP policy, flood conditions must affect at least a two-acre area or two properties, including the policyholder’s property. Thus, if your property is flooded but your neighbor’s isn’t, there’s a chance you won’t be able to recover under an NFIP policy. This provision underscores the NFIP’s historical purpose of addressing catastrophic floods and avoiding exposure to localized flood losses that could be managed by property owners on their own. The ISO definition of flood contains no such qualification. Flood, typically an excluded cause of loss under property forms, is treated as a covered peril — although with limits structured a little differently than in other ISO-based property forms and with some provisions unique to the treatment of the flood hazard. An ISO-based flood policy would thus respond to provide coverage for an inundation in a small area. It’s no accident that the introduction of the new ISO flood program coincides with the development of new, refined flood mapping techniques that identify relative exposure to flood down to the level of feet and meters. 9 The second major distinction between an NFIP policy and a private one based on an ISO flood form is the availability under the latter of coverage for loss of use, something not available at all under the NFIP.
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