Flood
Floods can happen anywhere. A statistic from the National Flood Insurance Program (NFIP) advised that “between 2015 and 2019, policyholders outside of high-risk areas filed more than 40% of all NFIP flood insurance claims”. Because the length of time between substantial occurrences can often be very long (~100 years) it is understandable that most think it “won’t happen” because it might only happen once in their life.
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From our agents
I think floods are something that is hard for people to grasp because they traditionally happen so rarely. They’re called “100 year floods” for a reason. I hear it all the time “I’ve lived here 20+ years and this property has never flooded” and that may very well be true but the matter of the fact is that if that 100 year flood does it, maybe it’s the only one you or your property will ever see; and it can be devastating. It can be expensive, but it’s good to at least explore the options.
- Peter (Briggs Agent)Most people probably are aware of flood insurance because of a lenders requirement to carry it if there is a mortgage on the property. For a long time the National Flood Insurance Program (NFIP) has been the go-to option, if not the only. The private market has been rapidly developing though and new options are sprouting, often with more comprehensive coverage and/or higher limits than the NFIP. Most critical to most is the premium (price) which can often be a fraction of the cost when compared to a NFIP policy.
- Peter (Briggs Agent)What does a flood policy cover?
Between the two categories, National Flood Insurance Program (NFIP) policies and private options, there are traditionally two main coverages; building and contents coverage. Flood insurance covers losses directly caused by flooding. Generally speaking, a flood is an excess of water on land that is normally dry, affecting two or more acres of land or two or more adjacent properties.
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FAQs
Basic Coverages
MA mandates that you must purchase four compulsory coverages, called Compulsory (or Mandatory) Coverages, in, at least, minimum amounts unless you choose to purchase higher amounts. You may also add an assortment of Optional Coverages to meet your needs.
FEMA has some great resources available at their website, FloodSmart. Visit them using the below button.
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Here are some examples of what’s covered with a standard flood insurance policy under Coverage A (Building):
Electrical and plumbing systems
Furnaces and water heaters
Refrigerators, cooking stoves, and built-in appliances like dishwashers
Permanently installed carpeting
Permanently installed cabinets, paneling, and bookcases
Window blinds
Foundation walls, anchorage systems, and staircases.
Detached garages
Fuel tanks, well water tanks and pumps, and solar energy equipment
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Here are some examples of what’s covered with a standard flood insurance policy under Coverage B (Contents):
Personal belongings such as clothing, furniture, and electronic equipment.
Curtains.
Portable and window air conditioners.
Portable microwave ovens and portable dishwashers.
Carpets not included in building coverage (see above).
Clothes washers and dryers.
Food freezers and the food in them.
Certain valuable items such as original artwork and furs (up to $2,500).
Miscellaneous
Up until recently, flood insurance was primarily available through the NFIP. This has been changing over the past few years with private insurance companies entering the market. The laws regarding which insurance(s) are allowed to fulfill the FDIC’s requirements have been a hurdle in the past but are getting better with the interest of private markets to grow their share in the market.
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Structures with whose loans are FDIC insured and overlap a SFHZ.
The Federal Deposit Insurance Corporation (FDIC) is an independent agency created by the Congress to maintain stability and public confidence in the nation’s financial system. The FDIC insures deposits; examines and supervises financial institutions for safety, soundness, and consumer protection; makes large and complex financial institutions resolvable; and manages receiverships.
A Special Flood Hazard Zone (SFHZ) is the area where the National Flood Insurance Program's (NFIP's) floodplain management regulations must be enforced and the area where the mandatory purchase of flood insurance applies. Traditionally exposures the NFIP sees as higher risk are placed into SFHZ.
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Often offering higher limits and/or more comprehensive coverage, private flood insurance options have become extremely popular over the past few years. Proprietary rating of private insurance companies has facilitated much lower premiums on average when compared to the NFIP.
For most FDIC backed loans, requirements for lenders have also been loosened to facilitate a place for private flood insurance options.
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Flood zones have traditionally been determined and used by the NFIP. Flood hazard areas identified on the Flood Insurance Rate Map are identified as a Special Flood Hazard Area (SFHA). SFHA are defined as the area that will be inundated by the flood event having a 1-percent chance of being equaled or exceeded in any given year. The 1-percent annual chance flood is also referred to as the base flood or 100-year flood.
Although the new Risk Rating 2.0¹ no longer uses traditional flood zones in its rating of policies, SFHZ’s are still used to determine requirement by relevant properties that have FDIC backed loans to carry insurance
¹ Per FEMA - FEMA is updating the National Flood Insurance Program's (NFIP) risk rating methodology through the implementation of a new pricing methodology called Risk Rating 2.0. The methodology leverages industry best practices and cutting-edge technology to enable FEMA to deliver rates that are actuarially sound, equitable, easier to understand and better reflect a property’s flood risk.
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