flood insurance

A common misconception is that damage from a flood will be covered under a homeowners policy or through FEMA.  The truth is, unless a disaster is declared by the federal government, flood insurance is the only way to protect your dwelling and personal property in the event of flood damage.  Chuck Hembree and Kristy Whipple join the program to discuss the basics on flood insurance.

Below is a transcript of the episode, modified for your reading pleasure. For more information on the topics discussed in the episode, see the links at the bottom of this post. 

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Grant FINLEY: Welcome to Your Insurance Connection Podcast.  I am your host, Grant Finley and joining me today we have the President of CLH Insurance, Chuck Hembree.  Chuck, how are you?  

Chuck HEMBREE:  Good morning to you.


FINLEY:  And that is not the only person we have here, we also have Kristy Whipple.  Kristy, how are you?


Kristy WHIPPLE:  Hi, how are you doing this morning?


FINLEY:  Doing very well, thanks for joining us.  


WHIPPLE:  My pleasure.


FINLEY:  Well, flood insurance is the topic today, so I would just start with the misconception that's out there that floods are going to be covered by your homeowners and can we just talk to why maybe that is so widely misconstrued?


WHIPPLE:  Probably because homeowners policies are marketed as covering everything.  "It's all covered, whatever happens, it's all covered," and obviously that's not true unfortunately in the case of any kind of a flood.


FINLEY:  What is a flood?  I remember 1993, I remember last year or two years ago whenever it was that the Meramec flooded.  I know what a flood is, but in terms of insurance, what is a flood?


WHIPPLE:  Well, the definition of a flood is an excess of water on land that's normally dry.  The official definition, however, that's used by the National Flood Insurance Program (NFIP) is that it's a general and temporary condition of partial or complete inundation of two or more acres of normally dry land area, or of two or more properties, at least one of which is your property from an overflow of inland or tidal waters, unusual and rapid accumulation of runoff of surface waters from any source, mud flow or collapse of subsidence of land along a shore, a lake or a similar body of water.  So, a great example that might make the definition a little bit more easy to understand is, during the April 7, 2015 hail storm, which included a downpour of, I don't know how many inches of water within a really short amount of time, there were a lot of people whose basements suddenly flooded from runoff water.  We had a client who now has flood insurance, he didn't at the time, but this was the case for him so the flooding that occurred in his basement and on his property would have met the definition of a flood because it was a temporary condition because normally his subdivision is not even near water, they're not even near a creek or a river, or stream, or lake, or a pond.  It did meet the partial or complete inundation of two or more acres of normally dry land area or two or more properties, which I think everybody on his block got it, at least one of which is your property and one was his.  So, the heavy downpour flooded several neighborhoods and unfortunately his house was one of them.  He did buy flood insurance, hopefully he'll never have to use it again and he took precautions and had the land rearranged, re-landscaped, so that it will help prevent that and also installed a french drain and a sump pump and that kind of thing.  So, that's what a flood is, it's where water all of a sudden - there's water when normally it's not there and it's a result of rain.


HEMBREE:  It might be important to mention too who establishes what a flood is and the definition and that's FEMA.  This is a government program.  Now, individual insurance in the '80s, the government created what was called a "write your own" program so that insurance companies could come in and better market and write a flood policy on behalf of the government, but this is a government program and so they're the ones who determine what is a flood, but that's the general definition that they've put out for us so that we have some guidelines and consumers have a guideline too.  Another thing I want to throw in real quick is, yes, we are concentrating on residential but flood insurance is available for commercial insurance as well.


WHIPPLE:  Right, and for our purposes, like our client in the example, had he had his flood policy at the time of the April 7, 2015 storm, then he would have qualified for coverage.  It would have been a covered claim in that event because he had the flood insurance.  Some people want to know why couldn't they just get the disaster relief from FEMA?  Well, in order to qualify for FEMA aid, your county has to be declared a disaster area by the federal government.  In the case of that particular storm, the St. Louis County was not considered a disaster area.  Now, in your December through January 2015, 2016 storm over Christmas where the Meramec flooded, we were definitely - St. Louis County, Jefferson County, Franklin County probably - 


HEMBREE:  Yeah, where it went out in to Pacific, Eureka, all those areas.


WHIPPLE:  Yeah, several different of those counties were considered, so people didn't have flood insurance, could have qualified and registered with FEMA in order to get aid through FEMA.  


HEMBREE:  And we might want to point out too that while they didn't get flood when we have a disaster relief, they could qualify for a government loan for flood.


WHIPPLE:  Right, right, but that's a great advantage of having a separate flood policy is because your county doesn't have to qualify for a disaster area in order to make a claim on the policy.


FINLEY:  So, Kristy, you kind of touched on it when you were giving your example, but if I live in a low-risk area, my community has never been flooded before - obviously, as you painted in that scenario, that gentleman had an unfortunate incident, but why - what are the odds of that happening all the time?  Why would I want to get flood insurance if it's never happened before?


WHIPPLE:  25-30% of flood insurance claims originate in low to moderate risk areas, and again, as you started the podcast with, your condo, renters and homeowners policies do not provide flood insurance.  So that's a great reason to get flood insurance and again, over Christmas last year with the rainstorms and the flooding, there were lots of people who had water in their basements that was not covered on their homeowners policy.  I was one of them.  We had a little flood in our basement but it's very common so it's a great reason to have flood insurance.


FINLEY:  So, is there any type of water damage that is covered under the homeowners?


WHIPPLE:  Well sure.  If you have a broken or frozen water pipe or a line from your washing machine or your dishwasher, refrigerator, from the ice maker for example breaks or comes apart somehow then you'll have coverage under a homeowners policy for that kind of water.  A homeowners policy can also be endorsed to cover water backup of sewers and drains, but that has to be endorsed on there.  But, again, if there's torrential downpours and our sewer systems are inundated and that backs up into your house, that's covered under your homeowners if you have the sewer backup endorsement on your policy.


HEMBREE:  Now, we do want to differentiate that occasionally, we'll have sewer backup due to a flood and without flood coverage, we still don't have any coverage.  Also, there's a special rate the federal government gives for those areas that are not normally in flood plains.  It's a much more affordable rate and so it makes it worth at least investigating.  Better to make a better informed decision than just assume that it's an expensive cost.  Kristy does that all the time in helping our insureds understand what the cost is and helps them with that decision.


WHIPPLE:  A flood insurance policy for a home and personal property, for example, in St. Louis County, is less than $500.  It'll cover up to $250,000 for your home, the actual structure of the dwelling and up to $100,000 for the personal property.  That includes a $1,250 deductible for home and personal property and that's the maximum amount of coverage available under a flood policy but again it's less than $500 and the flood insurance coverage and premiums offered are the same regardless of where you buy your insurance.  It's a program that's written through the National Flood Insurance Program and there's one rate for each level, so there's no competition.  You can't go down the road to this other guy and ask him for a quote and think it's going to be less.  No one should ever say, "Hey, I can get it for you for less," it's just the one, federal government program.  It just fits into a neat little box and that's it.


HEMBREE:  On the commercial side then, $500,000 is the maximum you can get on any one building and $500,000 on contents and there's basically three different forms.  There's a commercial form, there's the residential form that Kristy's been talking about today, and then there's another one for condominiums.  So, we really have three different types of policies and they each have their own little idiosyncrasies to fit in with what type of risk they're covering.


FINLEY:  So, it's a separate policy, they can't add it as an endorsement?


WHIPPLE:  No, it's not available as an endorsement.  It's a separate policy.  We write ours through a different broker that we use, but again, it's the National Flood Insurance Program policy.


HEMBREE:  I might say that for some of the commercial policies, if we've got a million, two million, three million dollar building, $500,000 isn't necessarily going to cut it and we do have the availability to put on some endorsements with some companies that can be a limit above that $500,000.  Obviously, most carriers want the government to take theirs first and then the sub limit or the additional limits can be endorsed on them.  So, normally we see about this time of the year the newspaper articles will start to come out, the radio advertisements will come out and the government puts on TV as well saying, "flood is not covered, flood is not covered."  But, we must struggle in that area because every year we'll have people calling in and saying, "I realize," like we lead off in the beginning, "that it's not covered underneath our homeowners."  They miss that, they think it's included.


WHIPPLE:  If you just wanted to buy a flood policy we would apply - if you wanted to apply today then your actual effective date will not be until thirty days from today.  Now, if somebody is buying a home and their mortgagee requires them to have flood insurance, and say they're closing on March 1st and that's sooner than thirty days, so in that case NIFP will get the policy issued with the March 1 effective date because it's required by the mortgagee.  

HEMBREE:  Likewise, for endorsements that are added on that are not the National Flood Insurance Policy, they have a 72 hour waiting period.  What they're trying to do is get you to think ahead of time with what your risk is, not come in and, "oh, my gosh, the flood is coming.  I'll get coverage now."  We want to cover accidents and unforeseen things, not, "hey, this is a sure thing that's going to happen, so I'll get it now."


WHIPPLE:  Some companies also will not allow us to add a sewer backup endorsement until the renewal - the policy renewal, so that's something to keep in mind too.  You can have sewer backup on a home, a condo or a renters policy.


FINLEY:  Well, perfect, good episode today.  I feel like there was a lot of knowledge shared and if you are listening and you don't have flood insurance, you need to get it because it's not covered in your homeowners or your renters!  If you have any other questions, certainly reach out.  We've got a full staff here that's ready to help and assist in any way we can, so unless anybody has any final thoughts?  Alright, thanks, everyone for listening and we'll catch you on the next episode.


Your Insurance Connection podcast can be heard on iTunes and Stitcher or by visiting clhins.com/content/podcast. If you like what you’ve heard you can support this podcast by rating and/or sharing it on your social platforms. CLH Insurance is a “Trusted Choice”, independent agency servicing Missouri, Kansas and Illinois. For more information on CLH Insurance, visit clhins.com or call 636.391.0700 to speak with an agent. Until we connect again, thanks for listening.  


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Show Notes - Where you can learn more about the people and ideas discussed in this episode. 

NFIP - National Flood Insurance Program 
FEMA - Federal Emergency Management Agency
Flood of 1993

Meramec Flood of 2015

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