The Basics of Flood Insurance

Flooding is the most common and costly natural disaster in the United States, causing an average of $50 billion in economic losses each year. Most U.S. natural disasters declared by the President involve flooding.

There is no coverage for flooding in standard homeowners or renters policies or in most commercial property insurance policies. Coverage is available in a separate policy from the National Flood Insurance Program (NFIP) and from a few private insurers. Despite efforts to publicize this, many people exposed to the risk of floods still fail to purchase flood insurance.

And, in light of the recent devastating floods experienced in the South, we thought it would be extremely important to shed some light on what flood insurance covers, how it is purchased, and provide an idea on the associated premiums.

WHAT’S COVERED

Building

  • The insured building and its foundation
  • Electrical and plumbing systems
  • Central air conditioning equipment, furnaces and water heaters
  • Refrigerators, cooking stoves and built-in appliances such as dishwashers
  • Permanently installed carpeting over unfinished flooring

Personal Property

  • Personal belongings, such as clothing, furniture and electronic equipment

WHAT’S NOT COVERED

  • Damage caused by moisture, mildew or mold that could have been avoided by the property owner
  • Currency, precious metals and valuable papers such as stock certificates
  • Property and belongings outside of an insured building such as trees, plants, wells, septic systems, walks, decks, patios, fences, seawalls, hot tubs and swimming pools
  • Living expenses such as temporary housing

FLOOD INSURANCE FOR BASEMENTS AND AREAS BELOW THE LOWEST ELEVATED FLOOR

Coverage is limited in basements regardless of zone or date of construction. It’s also limited in areas below the lowest elevated floor, depending on the flood zone and date of construction. These areas include:

  • Basements
  • Crawl spaces under an elevated building
  • Enclosed areas beneath buildings elevated on full-story foundation walls that are sometimes referred to as “walkout basements”
  • Enclosed areas under other types of elevated buildings

MANDATORY REQUIREMENTS

Homes and businesses with mortgages from federally regulated or insured lenders in high-risk flood areas are required to have flood insurance. While flood insurance is not federally required if you live in a moderate-to-low risk flood area, it is still available and strongly recommended.

RATES

The NFIP, a federal program, offers flood insurance, which can be purchased through most leading insurance companies. Rates are set and do not differ from company to company. These rates depend on several factors, including the date and type of construction of your home, along with your area’s level of risk. Most premiums include a Federal Policy Fee and ICC Premium. If your community participates in the Community Rating System (CRS), you may qualify for an insurance premium discount in some communities of up to 45% if you live in a high-risk area and up to 10% in moderate-to-low risk areas.

30-DAY WAITING PERIOD

Typically, there’s a 30-day waiting period from date of purchase before your policy goes into effect. Here are the only exceptions:

  • If flood insurance is being purchased in connection with the making, increasing, extending or renewing of your loan.
  • If a building has been newly designated in the SFHA and flood insurance is being purchased within the 13-month period following a map revision.
  • If flood insurance is required as a result of a lender determining that a loan that does not have flood insurance coverage should be protected by flood insurance.
  • If an additional amount of insurance is selected as an option on the renewal bill.
  • If a property is affected by flooding on burned Federal land that is a result of, or is exacerbated by, post-wildfire conditions when the policy is purchased within 60 days of the fire containment date.

Tips for Fire Claims

Recently there have been a number of wildfires throughout the country, many of them engulfing homes and destroying other property.   While we certainly hope you never have to deal with heartache and stress with losing your home or business to a fire, we would like to share some tips from the Insurance  Commissioner’s office on how to property deal with a fire claim.

According to the commissioner’s office you should do the following immediately after a fire claim:

  • Once you gain access to your property take pictures of the damage if it looks like the adjuster will be delayed.
  • Make sure your address is visible. You may have to spray paint the address onto a sheet of plywood and put it in view of the road so the adjuster can find it.
  • If you are not going to be at the property, let the adjuster know how to contact you.
  • Do not dispose of property until an insurance adjuster has reviewed it.
  • Save all receipts.
  • Avoid insurance adjusters and contractors that do not have a valid license or use high pressure tactics and require large deposits.

The commissioner’s office recommends you do the following to prepare for any future potential claims:

  • Review your property insurance coverage to make sure you have adequate limits.
  • Record an inventory of your possessions.
  • Make sure you store a copy of your inventory at a separate location.
  • Save all receipts.

If you have any additional questions or would like us to help prepare your company against any future claims, please feel free to contact our office.

Employee Dishonesty Insurance

As the economy continues to sputter, we are constantly hearing stories about employees committing desperate acts against their employer and even customers.

Here are some scenarios that we have seen happen to some of our clients in the past year:

• An employee stole inventory from the company and disappeared.
• An employee used the company credit card for personal purchases like a television, gas, clothes, etc.
• An employee skimmed money from the till for over 12 months amounting to a total loss of about $20,000.

The question we often get is on the possibility of purchasing insurance to cover these types of acts. You can certainly purchase coverage for this, but it must be done by adding Employee Dishonesty coverage to a Crime Policy.

Employee dishonesty insurance is coverage for just that: dishonest or criminal acts committed by employees. It covers losses where an employee steals money, securities or even tangible property. Some policies will even cover theft of clients’ belongings.

What is the typical limit? Like always this depends. Some companies are much more cash heavy than others, and the risk is greater for this type of loss. However, the typical limit we will see is anywhere from $50,000 to $100,000 in coverage.

How much does the coverage cost? Depending upon the limit and type of business, premium starts at a couple hundred dollars a year. Premium is almost always based upon the number of employees within the company.

Any policy exclusions?

• Acts committed by an owner, officer, or director within the company.
• Inventory shortages where the sole proof of loss is an inventory computation.
• Any employee that is discovered to have a history of prior dishonest acts either before or after being employed by the insured.

Trampoline Safety

Did you know that if you own a trampoline that your homeowners insurance will either surcharge you for the increased risk or exclude the claim from coverage? In fact, many insurance companies will refuse to write policies for homeowners with trampolines altogether.

Why are insurance companies so adverse to covering trampoline-related claims? They seem harmless enough, right? In reality, trampolines are actually very dangerous and can put you and your personal assets at risk if someone were to injure themselves on your premises.

According to the Consumer Product Safety Commission and American Academy of Orthopedic Surgeons, trampolines account for over 100,000 emergency room visits every single year at a cost of over $100 million.

Of those injuries 92.7% involve children under the age of 16 and 59.5% resulted in a broken bone. Even worse, an AAP study from 2012 pointed out that current data on netting and other safety equipment indicates no reduction in injury rates.

If you do own a trampoline, please follow the safety items below to help prevent injuries.

Trampoline Safety Measures

The first safety measure with trampolines as recommended by the American Academy of Orthopedic Surgeons, the Canadian Pediatric Society, and the Academy of Sports Medicine is to avoid them altogether.

As one E.R. Doctor recently lamented to the parent of a child injured on a trampoline, “Trampolines are our worst nightmare in terms of the number of accidents they cause.”

If you do own a trampoline, we highly recommend taking these steps to help prevent tragic deaths and serious trampoline injuries, especially paralysis, fractures, sprains and bruises:

  • Allow only one person on the trampoline at a time.
  • Do not attempt or allow somersaults, because landing on the head or neck can cause paralysis.
  • Do not use the trampoline without a full net enclosure and shock-absorbing pads that completely cover its springs, hooks and frame.
  • Place the trampoline away from structures, trees and other play areas.
  • No child under 6 years of age should use a full-size trampoline as they are the most susceptible to bone injuries.
  • Do not use a ladder with the trampoline, because it provides unsupervised access by small children.
  • Always supervise children who use a trampoline. (Though, it is worth noting that over half of all trampoline injuries occur with parental supervision nearby.)