Water you mean I’m not covered? Navigate the flood insurance knowledge gap

September 11, 2023

The summer of ’23 has brought disastrous weather events in almost every region of the country. The Northeast faced record-breaking flooding. Vermont received two months’ worth of rain—more than nine inches—in just a few days. More than 4,000 homes were damaged by flooding. Ironically, Vermont is often on the list of safest states for those seeking protection from climate change. Floods are reminding insurance professionals that the way we think about and prepare for unexpected weather events must change. Homeowners must be warned of the danger, and they must be offered protection for it.

Most insurance carriers do not cover flood damage in their homeowners policies. However, surveys indicate that 43% of homeowners are unaware that an additional flood insurance policy is required to cover flood events. Independent agents are well-positioned to educate homeowners on what perils are and are not covered by a traditional policy. In the past, agents would look up whether the home was in a federally designated flood zone.

Today, that advice is like telling customers they don’t need fire insurance because they have a sprinkler system. More than a quarter of flood claims are paid in areas where flood insurance is not required for federally backed mortgages. It is inexpensive to buy such coverage outside required zones. Insurers and their agents should encourage customers to supplement their standard coverage with flood protection.

Your client’s house is affected by water damage, now what?

The source of water tells us how a claim will be settled. Dwelling coverage in the standard homeowners policy—sometimes through an endorsement—often covers damage caused by things like a broken pipe or sump-pump failures. However, water rising from the ground usually is excluded. Generally, customers can determine whether a home or flood policy applies by asking themselves: “Did rising or rushing waters cause this, or did some part of my home’s structure fail in ‘normal’ weather?” Your home or flood carrier will help determine the proper policy to respond. In the event of a major declared flooding catastrophe, if the damage is not covered, it’s important to submit paperwork to the Federal Emergency Management Agency as soon as possible to avoid limits to disaster funding.

In the aftermath of a flood, good agents guide and support homeowners through what can be a confusing claims process. Agents can alleviate stresses their clients may face. Something as simple as explaining who may be knocking on their door can offer reassurance during the claims process. Our best agents act as a liaison with adjusters, while keeping homeowners informed of progress on the claim file, connecting them with resources for repairs and providing answers to questions. A smoother journey to recovery and rebuilding can create a customer for life.

Flood insurance isn’t an option or an upsell outside high-risk zones, today it’s a necessity

According to the Insurance Information Institute, repairing or replacing the structure and personal belongings damaged by rising water or other flood-driven damage is expensive—no matter where they live.

For decades, there was little choice when it came to buying flood insurance. Nearly all policies were written by the federal National Flood Insurance Program. The NFIP coverage uses an inflexible form and price plan with deductible, excluded damage and maximum coverage for all homes with very little variations based on the size and location of the home. Today, private companies offer a second, often more complete coverage and sometimes more affordable options. Agents are in a perfect position to provide guidance to prospective clients on what type of flood insurance is the best for their needs.

Promote preventative measures

Insurance cannot relieve the disruption of a damaging event or leave policyholders better off than they were. No matter how well insured they are, policyholders are better off never having a claim. Agents can recommend that homeowners take preventative measures such as installing a sump pump and flood vents, moving valuables to a safe location on a floor above the potential flood elevation and using flood-resistant building materials to ensure protection in the event of a flood. The original home purchase is a homeowners most important decision—they need to consider how vulnerable their homes are to flash floods and extreme rain at every elevation, and how quickly they can respond if waters rise higher than they have in past events.

After the storm has passed

Part of storm preparation is making sure customers know what to expect after an event. Strong winds and rapid—even brief—water flows can down power lines and cause extensive damage. Advise homeowners to check for the smell of gas outside their home during and after an event. And, to look for dangling electrical wires. They need to ascertain that floors and walls are structurally safe before beginning clean-up in the event of a flood. Mitigate and then remediate. Homeowners need to be aware of potential hidden damage, such as seepage behind drywall, and be wary of long-term damage that moisture creates such as mold and rotting.

Flooding is the most frequent natural disaster in the U.S., affecting homes in every state. Experts expect this trend to worsen. Floods that hit the Northeast put you, the agent, on the front line. You are a great resource to educate customers about where home insurance stops and flood insurance steps in. Rising waters threaten more than just flood zones. Give your clients the best option to be educated, prepared and above water, physically and financially.

Bill Martin
Plymouth Rock

Bill Martin is the president and CEO of Plymouth Rock’s Home Insurance Group at which he oversees the business’s operations and reinsurance program. Bill has 35 years of experience in the property/casualty insurance industry. He has held senior positions at Farmers, Great American, Progressive and Travelers. Prior to joining Plymouth Rock in 2016, Bill was president of Bankers Insurance in St. Petersburg, Fla. He has a B.A. in political science from Stanford University. He is an avid sailor, skier, trombone player and sports fanatic.

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