Spring thaws take place in late February through early April; tornado season began on April 1st; and hurricane and wildfire season both commence on June 1st. That makes late spring and early summer “disaster season,” for lack of a better term. Tornados and wildfires, however, do not cause the coverage issues that spring floods and hurricanes do. With water, flood becomes the issue.

No matter how many advertisements FEMA runs or how much advice agents provide, there are always people running uninsured because they opted out of purchasing flood insurance. For those who did purchase flood insurance, as in any insurance policy, certain parameters must be met in order for coverage to apply. Let's look at some of those parameters.

Aside from defining “you” and “your” as most insurance policies do, the flood policy first defines “flood.” It is easy for people to think that water in the basement and around the house constitutes a flood; however, there are specific parameters that must be met. A flood is defined as a temporary condition where two or more acres or two or more properties are partially or completely inundated by overflow of inland or tidal waters, unusual and rapid accumulation or runoff of surface waters from any source, or mudflow.

This means that while an insured who surveys water in the yard and the basement may believe that his property has been “flooded,” an accurate diagnosis to determine coverage applicability relies on other factors. According to the flood policy, the aforementioned insured has not experienced flooding unless the neighbor's property is inundated at least partially as well. Thus, the insured may well be uninsured because his property is not technically flooded as defined in the flood policy, as well as because water is excluded in the homeowners' form. Homeowners' insurance exclusions include flood, surface water, waves, tides, tidal water, and other sources.

What about Mud?

Mudflow is defined as “a river of liquid and flowing mud on the surfaces of normally dry land, such as when earth is carried by a current of water.” This does not include landslides, slope failures, or a saturated soil mass moving by liquidity down a slope, all of which are actually earth movements. There must truly be a river of mud. Flood waters must have accumulated dirt along the way to form mud, similar to a volcanic lahar, which is a moving fluid mass composed of water and volcanic debris. Mudflow is covered, whereas landslides, slope failures, and saturated masses are not.

Another key definition is that of direct physical loss by or from flood. This is damage to property caused directly by a flood, and there must be evidence of physical changes to the property. Indirect damage is not covered. A subsequent fire or theft of property because of damage from the flood is not covered by the flood policy, either.

Unlike the homeowners' policy, the flood policy does not provide coverage for structures other than a detached garage. Therefore, sheds, gazebos, swimming pools are not covered by flood insurance. Additions to the dwelling may be covered, however, as long as they attach to and contact the dwelling by means of a rigid exterior wall, a solid load-bearing interior wall, a stairway, elevated walkway, or roof. Because water is so powerful, smaller non-attached structures can easily be washed away, so there is no coverage for them.

The “45 Days” Rule

Personal property is covered for up to 45 days from flood if it has to be relocated to protect it from flood or imminent damage from flood. Because this is a flood policy, it is not going to expand coverage beyond flood when property is moved elsewhere. During hurricane season, however, it is possible that a second hurricane could come through before the insured has resettled into the original home, and the personal property could be damaged past 45 days.

At this point, there would be no coverage for that loss. Payment is only for 45 days from the date of the first flood. Only $1,000 is paid for the expenses for moving the property, not the property itself. This must be read carefully lest the insured receive only $1,000 for the property when the value of the property is due; it is the expense of moving and storing the property that is limited to $1,000.

Rising Lake Waters

The flood policy contains a unique section regarding continuous lake flooding. If the building has been flooded by rising lake waters for 90 continuous days or more and it appears relatively certain that the flooding will continue there are provisions for paying the claim before the loss is completed. The amount of damage the building will sustain must be equal to the policy limits plus deductible or the maximum payable amount under the policy for any one building, and the insured must agree to make no further claim, not seek renewal of the policy, not apply for additional flood insurance for property at the described location and to not seek a premium refund then the provider will pay the loss. This allows the insured to begin moving on instead of waiting for the house to be totally destroyed before filing a claim and receiving funds.

Of course, these are just some of the unique features of the flood policy; it is specially tailored for one type of loss, flood, and it is written accordingly. Similar in some ways to the homeowners' policy but different in others, flood insurance provides much-needed coverage when an insured is aware of his exposure and purchases the proper coverage.

Christine G. Barlow, CPCU is an associate editor with FC&S®. She has an extensive background in insurance underwriting. She may be reached at cbarlow@nuco.com. Additional information about FC&S Online is available at www.fcands.com.

Special Reports /

The Parameters of Flood Insurance

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