FOR RELEASE ON RECEIPT
October 30, 2012
Flood Insurance: What Consumers Need To Know
CHICAGO—Hurricane Sandy has created
massive flooding, and more flooding is imminent in the coming days. As remnants
of the storm affect many states, residents first and foremost should continue
to heed the warnings issued by local officials. Once the storm subsides, there
is much that can be done to make the recovery process smoother and, once it is
safe, to minimize further damage to property. The Property Casualty Insurers
Association of America (PCI) will be providing ongoing information regarding
flood insurance and recovery suggestions as the storm’s damages become clear.
HOMEOWNERS INSURANCE VS.
A standard homeowners
insurance policy provides financial protection against disasters by insuring
the home itself and your personal property. Homeowners insurance is a package
policy that covers both damage to property and the homeowners liability or
legal responsibility for any injuries and damage to property caused on the
premises. While damage caused by most disasters is covered, there are a few exceptions
including damage caused by a flood. This must be bought as a separate policy.
National Flood Insurance Program (NFIP) is the primary source for flood
insurance in the U.S. The often catastrophic nature of flooding has kept most
insurers from writing flood coverage. The NFIP was established by Congress in 1968, in response to the rising cost of taxpayer
funded disaster relief for flood victims and the increasing amount of damage
caused by floods. The Mitigation Division, a component of the Federal Emergency
Management Agency (FEMA), manages the NFIP, and oversees the floodplain
management and mapping components of the program. Nearly 20,000 communities
across the United States and its territories participate in the NFIP by
adopting and enforcing floodplain management ordinances to reduce future flood
damage. In exchange, the NFIP makes federally backed flood insurance available
to homeowners, renters and business owners in these communities. The
“Write-Your-Own” (WYO) program was set up by FEMA to allow private insurers
through their agents to write flood insurance policies. WYO insurers write the
majority of the federally backed policies in the NFIP.
WHAT DOES FLOOD INSURANCE COVER?
insurance covers direct physical losses by flood and losses resulting from
flood-related erosion caused by waves or currents of water exceeding
anticipated cyclical levels and accompanied by a severe storm, flash flood,
abnormal tide surge, or a similar situation which results in flooding.
The standard flood policy for
homeowners covers structural damage, your air conditioner, furnace, water
heater and cleanup associated with a flood. In addition, you can purchase
coverage for the contents of your home as part of the flood policy.
are covered for replacement cost but coverage for personal possessions is
available on an actual cash value basis only. Coverage for the contents of
basements is limited and usually only covers a home's foundation elements and equipment that is necessary to support
the structure (for example: furnace, water heaters, circuit breakers, etc.).
is a 30-day waiting period before the coverage becomes effective.
WHAT IF YOU DON’T HAVE FLOOD INSURANCE?
Federal Disaster Assistance
may be available in the form of grants and loans if a flood has been declared a
federal disaster. People who receive Federal Disaster Assistance for a flooded
building will need to obtain flood insurance, which is one of the requirements
for federal grants and low-cost loans. They will also need to maintain the
flood insurance for the life of the loan.
composed of more than 1,000 member companies, representing the broadest
cross-section of insurers of any national trade association. PCI members write
over $180 billion in annual premium, 39.2 percent of the nation’s property
casualty insurance. Member companies write 45.5 percent of the U.S. automobile
insurance market, 32.0 percent of the homeowners market, 37.3 percent of the
commercial property and liability market, and 40.6 percent of the private
workers compensation market.