In the past weeks, we’ve all seen pictures of people stranded on top of their homes or someone paddling down the street in a boat or kayak. What we don't see is how businesses and individuals deal with the financial impact of a flood.
Whether you’re a pastor of a church or a facilities manager, the congregation looks to you to protect their church.You work with the board and an insurance specialist to design an insurance program that helps reach that goal. However, most insurance policies covering your buildings and contents don't provide coverage for damage by flooding. In fact, flood is specifically excluded in most insurance contracts. So, what do you do?
The first thing to know is what constitutes a flood. In its simplest definition, a flood is rising water or flowing mud on land that is normally dry. It must include two or more properties, or two or more acres. It can also include collapse of land along the shore of a lake or similar body of water as a result of erosion caused by waves or currents of water. (Coverage subject to NFIP policy terms, conditions and exclusions.)
In spite of the common belief, a flood is not water from a broken pipe or water that comes in from a hole in your roof. Normally a backup of sewer or drain pipes is not be considered a flood, either.
Another common misconception is that your building/property must be located near a body of water such as a river, stream or lake to risk suffering a flood. However, the determination of a flood zone has more to do with the path water takes in flooding situations. A street, wash or gully that is normally dry can become a raging torrent with little or no warning during a heavy rain or if a river or canal overflows its banks or breaks a levy.
How do you determine your faclity's risk of suffering a flood loss? Working with the Federal Emergency Management Association (FEMA), communities have developed flood maps to help estimate how often a location is likely to suffer a flood loss. These maps indicate whether a property is located in a flood zone. The zone number assigns a value to the flood potential.
If you own a building that has a bank-held mortgage and that building is located in a flood zone "A" or "V," it’s likely that you’ve already had to purchase flood insurance. However, if your facility is not in one of these zones, or if your church has no mortgage, you may never have had to address the need for flood insurance. Unless your facility is located in an area that has recently experienced a flood, your insurance agent may never point out that flood is specifically excluded from your property insurance policy.
So, you understand there may be a potential for damage from a flood. How do you deal with this potential for a loss?
Armed with the age of your buildings, the replacement value of your building and the replacement value of your contents, contact a flood insurance specialist. These are insurance agents who have been trained by the National Flood Insurance Program (NFIP) to review your situation and provide insurance quotes through NFIP-authorized flood insurance companies.
The U.S. federal government provides the financial backing for the NFIP programs. The policies can provide up to $500,000 coverage on a building and/or $500,000 coverage on contents provided the location meets NFIP guidelines. The polices can have deductibles ranging from $1,000 per claim to $10,000 per claim. Working with your agent, you can select the appropriate coverage level and deductible to meet your needs.
Frequently the NFIP policies cannot provide the total coverage limit needed. In this situation, insurance may be available in the commercial marketplace to provide additional limits for building, contents and to include loss of income or other specialized coverage (not available from NFIP). In some instances, a commercial insurance company may be able to include coverage for the flood exposure in your normal business insurance package.
Working with a flood insurance professional can provide you with options and risk assessment information to help you make an educated risk management decision for your facility. Don't be caught unprepared this flood season.
Betty J. Meier (CPCU, CIC, ARM, CRM, ASLI, CSRM) and Robert L. Meier (CRM, CSRM) are the owners of Adaptive Insurance Agency, LLC located in Scottsdale, Arizona. Betty has been in the insurance industry as an agent and risk manager for over 35 years, while Robert joined the industry in 2000 after retiring from a career in education.