Bagwell & Bagwell MythBusters: Common Misconceptions About Flood Insurance

Flood coverage is an important coverage that is not discussed enough throughout our industry. Thanks to the help of our friends at FEMA, I want to share the most common rebuttals that I hear about flood coverage and wade through the fiction to get to the facts.

“I have flood coverage through my homeowners policy.” MYTH: Flood insurance coverage is included in the standard property policy (homeowners or commercial property policy).
FACT: Standard, unendorsed personal property policies, including homeowners and dwelling fire policies, and commercial property policies exclude flood coverage.
“I don’t need it because the bank isn’t requiring it.”
MYTH: My lender does not require flood insurance, so I do not need the coverage.
FACT: Typically, lenders only require flood coverage on properties in Special Flood Hazard Areas (SFHA), also known as the 100-year floodplains. Property owners outside of the 100-year flood plain receive 1/3 of federal disaster assistance for flooding and constitute 20% of claims filed by NFIP (National Flood Insurance Policy) policy holders. FEMA says it best: “Anywhere it can rain, it can flood.” Here is a link to look up your property on the flood map.
“If my property does flood, we have bigger problems. I am going to hedge my bets instead of paying the astronomical flood premium.”
MYTH: Flood insurance is expensive, and the chances of my property flooding is too low to justify the cost.
FACT: If your chances of flooding are actually that low, the premium is going to reflect those chances. The average cost of a flood policy is about $700 per year.
“I don’t own my building so I can’t get flood insurance.”
MYTH: I cannot purchase flood coverage because I rent my house or my business’s space.
FACT: Flood insurance is available for contents coverage only which is an important solution for renters and businesses that rent the spaces they operate out of. Flood insurance is available for homeowners, other residential buildings like apartments and condos, and non-residential buildings like office spaces.
“I am not paying for an elevation certificate so I can’t get a quote for flood coverage.”
MYTH: You must have an elevation certificate to get a flood insurance quote.
FACT: Depending on the property’s flood zone, your agent may be able to quote flood insurance without an elevation certificate. It is always worth asking! If the property does require an elevation certificate, the average cost is $600.
“FEMA paid my flood loss during Hurricane Matthew so I am counting on disaster assistance.”
MYTH: Disaster assistance from FEMA is a substitute for an insurance policy against flood.
FACT: A flood insurance policy will respond to flood events that do not constitute a Presidential disaster declaration. In fact, federal disaster declarations are issued in less than 50% of flooding events. Disaster assistance is usually allocated as a low-interest loan and must be repaid. Flood insurance claims are paid even if a disaster is not declared by the President and there is no payback requirement. Also, flood insurance policies are continuous, and are not non-renewed or canceled for repeat losses.
“I am most concerned about loss of business income due to a flooding event and there is no coverage for that. Thanks, but no thanks!”
MYTH: Flood coverage does not include loss of use or business income coverage.
FACT: Although flood policies written through the National Flood Insurance Program do not offer loss of use coverage nor business income coverage, private flood companies offer products that do include this coverage.

I encourage you to go ahead reach out to your insurance agent to discuss your flood exposures and options for coverage. There is a 30 day wait under most circumstances so you don’t want to wait until a threat is imminent!

References:

https://www.fema.gov/blog/2018-07-23/5-common-flood-insurance-myths

https://www.fema.gov/news-release/2019/06/11/fact-sheet-myths-and-facts-about-flood-insurance

https://www.fema.gov/media-library-data/1510759434562-dfb20c9a88200a9b6eae4a8e26443b75/FactSheet_Flooding_Am_I_At_Risk.pdf