Superstorm Sandy hit the Jersey Shore full force onOct. 29, 2012. The damages will certainly be around for a long timeto come.

Offices for The Van Dyk Group are located in Ocean County, N.J.,with our main office on Long Beach Island, which took a direct hit.One of our other offices is located in Stafford Township, N.J., themainland area across the bridge from Long Beach Island. A majorportion of Stafford Township consists of lagoon-front communitiesbuilt in the '60s and '70s. Sixty percent of our insureds hadclaims from Superstorm Sandy.

Sandy ended up being a major flood event as opposed to the windevent that is experienced with most hurricanes. Practically all ofthe homes and businesses on Long Beach Island had some sort offlood damage, and the lagoon-front homes in Stafford Township allhad flood damage, with most homes having at least 2 feet ofwater.

It's hard to believe that many people living in flood-proneareas do not have flood insurance. These are homes that are righton the water or within a block or two of both the ocean and thebay. You can see tidal waters from just about every home in ourarea.

Related: Read another article by Dave Wyrsch “ThinkToys to Enhance Retention.”

It has been estimated that at least 25 percent of the propertiesthat Sandy damaged were not insured for flood—and that may be aconservative number.

Most homeowners who go without flood insurance don't anticipatethe worst, so they save money and do without the coverage. Mostpeople do not read their policies and have little idea about whatis covered. It seems as though an agency's efforts to get the wordout are ignored, and when it comes time for a claim, everyonepleads ignorance.

Consistent communication, checklists and sign-off waiverstatements do help educate clients and promote awareness.

Four major areas help you become more familiar with flood claimsafter a disaster like Sandy:

1. Flood coverage exclusions
2. Substantial damage
3. Flood elevations
4. Increased cost of compliance (ICC) coverage.

The main exclusions that relate to a flood policy includeanything outside of the parameters of the dwelling's actual livingarea. This includes the home's exterior property and property belowthe first-floor living area of a post-FIRM house.

Keep in mind that a flood policy is different from a typicalhomeowner's policy. Flood policies are emergency policies geared togetting a homeowner back in his home, unlike homeowners' policies,which are designed to replace everything the homeowner lost.

There is no coverage in a standard NFIP policy for propertyoutside of the dwelling, such as swimming pools, hot tubs, decks,docks, bulkheads, sheds or landscaping. NFIP policies also do notcover for removal of debris around the property that is not underthe living area of the dwelling. NFIP has required since 1976 thatall new buildings be elevated and that nothing underneath would becovered by flood insurance with minors exceptions for essentialsystems needed for the operation of the house.

After Sandy, debris like sand, boats and docks were washed ontoproperties from the tidal flooding. Many properties had as much as5 to 10 feet of sand that had to be removed at the owner's expense.No debris removal is covered around the house or under decks, onlydirectly underneath the home or living quarters.

Expensive landscaping including bushes, shrubs, trees,decorative rock, stone paving and patios were destroyed or justplain washed away—all of which is not covered under the NFIPpolicy.

Related: Read the article “What's Your Flood Zone?”by Dave Wyrsch.

Loss of use of the property and business interruption coveragealso are excluded in NFIP policies. Many homeowners were leftwithout a place to live and had to stay at hotels, motels or rentalproperties at their own expense. Fortunately, FEMA offers grants toyear-round residents to reimburse them for living expenses.

The lack of business interruption coverage created problems forthe local businesses that remain open year-round. Many of thesebusiness owners again turned to FEMA for Small BusinessAdministration (SBA) loans to help them out while their operationswere closed.

Many owners of elevated post-firm buildings were surprised atthe lack of coverage for contents or improvements located under theelevated first flood living area. Although these items are clearlyspelled out on page 4 of the standard NFIP dwelling policy, mostowners do not read their policies or any of the many pamphlets andbrochures provided by NFIP that clearly spell out what is notcovered.

As we have pointed out to our clients and as common sensedictates, there is a reason the building codes force you to elevateyour buildings and use breakaway siding on the pilings. There isnot supposed to be anything in these areas that can be damagedexcept for utilities and systems essential to the operation of thehome. It is not designed to be an extra storage or additionalliving area.

Rooms, sheetrock, stairwells, storage enclosures, cement padsand contents are not covered in these sections of a property.Unfortunately, many property owners have incorporated fancyentryways and foyers under their living area, without coverage forsuch additions.

Many clients asked where they could get coverage for propertythat was flooded and not covered, but a flood policy is the onlypolicy available for damage from flood waters. Excess coverage isavailable for policy limits, but these have the same exclusions asa standard flood policy.

When a property is “substantially damaged” by more than 50percent of what the dwelling is worth, the dwelling must be broughtup to existing codes to comply with the latest flood insurance ratemaps (FIRM).

This means if your dwelling was substantially damaged, you musteither elevate, demolish or move your dwelling to be in compliance.The dwelling must be brought up to a higher elevation in order toreceive affordable flood premiums.

In the lagoon-front sections of Stafford Township, most of themore than 2,000 homes had 2 to 5 feet of water and fall into the“substantially damaged” category. Most homeowners wanted to fixtheir homes and move back in, but then learned that not bringingtheir homes up to compliance could result in astronomical floodpremiums of $20,000 to $30,000.

FEMA acted quickly and issued new advisory base flood elevations(ABFEs), which recommend rebuilding to higher limits.Unfortunately, these elevations may not be finalized until sometimethis summer. We have advised our clients to be very careful beforerebuilding to ensure they do not fall into the “substantial”category by going to the towns and laying out theirdamages, plans and options.

It is up to the local governing bodies and building departmentsto determine if a property has “substantial” damage and must comeinto compliance with the new codes.

Even though FEMA is increasing the new recommended base floodelevations by around 2 feet, we suggest homeowners build up anadditional 2 to 3 feet to meet the highest of the FEMA suggestedelevations.

Related: Read Dave Wyrsch's article ” The CoastalCoverage Challenge.”

The next step for the homeowner is how to pay for the cost ofelevating his or her home. That is where the ICC (increased cost ofcompliance) coverage comes into play. The ICC coverage is part ofevery flood policy and offers homeowners up to an additional$30,000 to help defray the cost of raising a home.

To qualify for ICC coverage, the property must have sustained“substantial damage.” Once a municipality has deemed a propertysubstantially damaged, it issues a letter to the homeowner advisingthat he or she must come up to compliance with existing buildingcodes and advises him to file an ICC claim.

The homeowner should take this letter to his or her agent, whothen must file an ICC claim with the write-your-own (WYO) floodcarrier. It is up to the homeowner to contact builders, contractorsand house raisers to obtain estimates for the work to be done.

The coordination and communication between the initial floodadjustor, WYO carrier, homeowner and agent is extremely importantto keep everything moving forward at a reasonable pace. Of course,not much is a “reasonable pace” when someone is without a home withnowhere to live; but that's where the role of the agent becomesvital.

In light of our experiences during Sandy's aftermath, we suggestagencies tighten up their recommendation checklists, produce abrief handout outlining the exclusions of the standard NFIP floodpolicy, and keep them front and center with every client.

It has been very helpful for our clients that we have stayed ontop of the proposed regulations FEMA has put out and offered adviceon what the effects of non-compliance may be. The towns are makingsure the homeowners are aware of the new regulations. Agencies mustinform their clients of the affects these regulations may have ontheir future flood insurance premiums.