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MANAGING YOUR RISK - APRIL 2008

Flood Insurance Misconceptions
By Anthony Bevilacqua

Flood insurance is one of the most misunderstood forms of insurance. According to Army Corp of Engineers and National Flood Insurance Program statistics, New Jersey is historically one of the top five states in the nation in terms of the number of flood losses incurred. Yet, most homeowners don’t purchase flood insurance unless their bank instructs them to do so when they apply for a mortgage.

Flooding is nature’s most commonly occurring disaster. Did you know an average home is five times more likely to incur flood damage than fire damage? If you live near a stream, lake, river or other body of water, during the life of a typical 30 year mortgage, you have a 1 in 4 chance of flood damage.

A flood is defined as “a general or temporary condition of complete or partial inundation of normally dry land by surface water from any source.” Wow! What a broad definition. Interestingly enough, almost 25% of all flood claims occur in low to moderate flood risk areas.

Flood losses are not covered by a typical homeowner policy. A special federal flood insurance program is the preferred method to protect you against a financial loss from flooding. The policies are easy to quote and issue and offer valuable protection to repair flood damage to the structure or the contents of your home. A typical homeowner can purchase up to $250,000 of building coverage and up to $100,000 of contents coverage. Commercial building owners can purchase higher limits.

Homeowners who have finished basements can be surprised to learn after they have a flood loss that much of their personal property such as furniture, rugs, electronics, moldings, doors, wallpaper and paint are NOT covered by flood insurance. However, flood insurance policies will insure the foundation walls, wood studs, unfinished drywall, furnace, hot water heater, water softener and electrical or mechanical equipment located in a basement.

Some homeowners rely on disaster relief funds from FEMA to repair or rebuild their home after a flood. It is important to remember these funds are low interest loans that must be repaid. Flood insurance does not require you to repay the insurance company. Further, flood insurance claim payments are made available much more promptly and efficiently through insurance companies than waiting for the paperwork to process for a disaster relief loan through FEMA.

Take time to speak with your insurance agent about flood insurance to understand what is covered by the policies and how they can safeguard the investment you have in your home.

Anthony Bevilacqua, CPCU is President of Anthony & Company, an independent insurance agency with special insurance and risk management services tailored to the needs of the commercial and residential development community. You can reach Mr. Bevilacqua at (908) 806-8844 or email him at insure@anthonycompany.com.

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