It seems that flood insurance has been one area neglected by a majority of insurance agents in the Commonwealth. According to The Federal Emergency Management Association, or FEMA, destructive flooding regularly occurs throughout Massachusetts and yet only two percent (2%) of residents and business owner’s in the Commonwealth have flood insurance. Why is this so?
FEMA suspects that this this number is so low because of the many myths surrounding the National Flood Insurance Program (NFIP). Or, is it that you think neither you, your agency nor your clients live in a flood zone and thus don’t need flood insurance?
The truth is that we all live in flood zones, as FEMA points out, it is just a matter of whether we you live in a moderate -to-low or a high risk zone. As such, agents should seriously think about making flood insurance an integral part of their agency’s offerings. It is something that with a little training can be easily incorporated into your existing agency portfolio of products. Moreover, it is an obvious extension of an agent’s business because as FEMA says ” an insured will look to you, their agent, more than anyone else for help after a flood.” To help you decide, Agency Checklists culled together some interesting facts from the NFIP:
- Flooding is the most common natural disaster.
- Floods can occur almost anywhere at any time. You don’t need to live near water.
- Flash floods, inland flooding and seasonal storms bring flooding to every region of the country.
- Just inches of water can cause tens of thousands of dollars in damage.
- Most homeowners insurance does not cover floods. Thus, making sure your clients know this and our covered is just a natural.
- Only flood insurance financially protects an insureds home and their personal property from floods.
- A flood insurance policy compensates homeowners, renters and business owners for all covered losses, and as opposed to a disaster loan, there is no payback requirement.
- The average flood insurance policy costs about $600 per year.
- People outside of high-risk areas file over 20% of NFIP claims and receive one-third of disaster assistance for flooding.
- Flood insurance does provide limited basement coverage. Though it does not cover finished walls, floors, ceilings or personal belongings, it does cover structural elements, essential equipment and other basic items located in basements.
- While flood insurance does not cover seepage or leaks it will cover damage caused by sewer or drain backup as well as overflows from a sump pump or related equipments, if the event is a direct result of flooding.
The National Flood Insurance Program also has developed an entire website dedicated to agents who sell flood insurance. www.agents.FloodSmart.gov. The in-depth site has a wealth of information for agents either are new to the idea or are already selling flood insurance. Agents new to flood insurance might want to start with the NFIP’s registration guide and then move on to learn more about the specifics of selling flood insurance and writing a policy. In addition, the site also gives a plethora of information on how to approach the topic of flood insurance with your clients and information on how to dispel a lot of the myths which surround flood insurance.
Agents already selling flood insurance may want to think about maximizing some of the free tools and information the NFIP provides for agents. For example here are a couple of interactive tools that can be imbedded onto your web site in order to help your clients understand what constitutes a flood as well as a realistic cost-analysis of what flood damage can do to a household budget.
Cost of Flooding Tool
If you already sell flood insurance, you also might want to reinforce your advertising and marketing campaigns by taking advantage of two ways in which FEMA and the NFIP can help grow your business via their Agent Referral Program and the Co-Op Program. The Co-Op Program will help agents evaluate their advertising, provide tips on creating a marketing plan and provide agent reimbursements for some expenses.
Agents may want to begin to acquaint their customers with flood insurance and its importance by sending out a simple letter debunking some of the myths surrounding flood insurance. This came right from the FloodSmart website and was created for agents to use with their clients:
Insured: I already have homeowners insurance.
AGENT: That is great, but did you know that while most homeowners insurance policies cover fires they do not cover floods? Now consider this: in a high-risk area, your home is more than twice as likely to be damaged by a flood than by a fire.
Insured: Floods? That’s what disaster assistance is for.
AGENT: Federal disaster assistance is only available once the President declares it a disaster. Moreover, federal assistance is usually a loan that you must pay back with interest. For example, a $50,000 loan at 4% interest would make your monthly payment around $240 a month or $2,880 a year, for 30 years. This would be in addition to any mortgage loan you already owe on the damaged property. In addition, any federal disaster loan would require that you buy and maintain flood insurance for the life of the loan.
Myth: You can’t buy flood insurance if you are located in a high risk flood area.
FACT: You can buy flood insurance in Massachusetts through the NFIP no matter where you live, with a few exceptions, as long as your community participates in the NFIP. The NFIP is a voluntary program and not all communities choose to participate.
MYTH: You can’t buy flood insurance immediately before or during a flood.
FACT: You can purchase flood insurance at any time. There is, however, a 30-day waiting period after you’ve applied and paid the premium before the policy is effective.
MYTH: Flood insurance is not available to renters.
FACT: Flood insurance can provide up to $100,000 of coverage for the contents of any residential building, this includes the contents of a renter’s apartment or home.
MYTH: You can’t buy flood insurance if your property has been flooded.
FACT: It doesn’t matter if your home, apartment or business has flooded. You may still be eligible to purchase flood insurance for property in Massachusetts except in a non-participating community.
MYTH: Homeowner’s insurance will pay to repair and replace property that is damaged by flooding.
FACT: Unfortunately, many homeowners do not find out until it is too late that their standard homeowners policy does not cover damage due to rising or standing water from flooding.
MYTH:Only residents of high risk flood zones need to insure their property.
FACT: More than 20 percent of claims are made from areas outside of mapped high risk flood zones. Even if you live in an area which is not flood-prone, it’s advisable to have flood insurance. Remember – Flooding also can be caused by snow and ice melt, dam breach, extremely heavy rain fall or a hurricane. The NFIP’s Preferred Risk Policy, available for about $400 a year for full coverage, is designed for residential properties located in low-to-moderate flood risk zones.
MYTH: Federal disaster assistance will pay for flood damage.
FACT: Before a community is eligible for disaster assistance, it must receive a federal disaster declaration. Declarations occur in less than 50 percent of flooding incidents. Even if federal disaster assistance is available, not everyone is eligible, when FEMA assistance is available, the amount may be less than needed to complete repairs and replace property.
It seems to us, that selling flood insurance makes a lot of sense for agents because truth-be-told, if a client suffers a flood the first place they are likely to turn to and to place blame is on their insurance agent. So take a look at the information and learn whether or not this might be an opportunity to grow your agency.
If you already sell flood insurance, let us know how it is going by joining the conversation below.