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Risk in Context

Five Misconceptions About Excess Flood Insurance

Posted by Ian Macartney October 22, 2015

The first loss estimates for the devastating floods that hit South Carolina earlier this month peg the total damage at more than $1 billion. For many small businesses and homeowners, much of the loss — but not all — will be covered by flood insurance policies purchased under the National Flood Insurance Program (NFIP). Augmenting NFIP coverage with excess flood insurance can provide broad coverage above available NFIP limits.

Misconceptions About Flood Coverage

Excess flood coverage can also protect against business interruption losses, which can be a major issue for organizations that suffer disruptions to their operations after a flood. Nonetheless, there are several misconceptions about flood insurance.

Here are four:

1. Misconception: Excess flood coverage is expensive.

Reality: The truth is that many businesses fail to understand how much their company is worth and thus under-insure. Almost 40% of small businesses in the US fail following a disaster, most often a flood event, according to the Federal Emergency Management Agency (FEMA). You should work with your insurance advisor or Write-Your-Own (WYO) agent to evaluate your business and/or home assets.

2. Misconception: The flood coverage available through the NFIP is sufficient.

Reality: Under the NFIP, commercial property owners can purchase up to $500,000 in building and $500,000 in content coverage. Those amounts can erode quickly. It only takes a few inches of floodwater to cause tens of thousands of dollars in damage.

3. Misconception: Excess flood coverage is not written in conjunction with WYO insurers, therefore the claims process would be difficult.

Reality: The third-party administrator (TPA) involved for an excess coverage loss should work in concert with the NFIP’s claim adjuster to ensure consistent claims. In many cases, it may be the same company and potentially one person dealing with both claims.

4. Misconception: It can take months to bind an excess flood policy; it’s not worth the hassle.

Reality: Due to the growth of automated binding platforms, some excess flood insurance programs offer real-time quoting and binding, available in all 50 states.

5. Misconception: The NFIP is only for small businesses and homeowners.

Reality:   Large commercial businesses can access the NFIP and excess flood market as a means to buy down large deductibles on their property programs.

As you discuss NFIP quotes with your advisors and WYO agent, it is important to ask for quotes and information about excess flood insurance. In the aftermath of a storm, excess coverage can protect assets, keep your business running, and save hundreds of thousands of dollars.

Related to:  Flood Services

Ian Macartney

Flood Insurance Services Practice Leader