Excess flood insurance is an extension of the standard coverage related to flood insurance, backed by the NFIP. It covers claims beyond the limit of $250,000. Who among your clients needs this insurance?
When to Get Excess Flood Insurance?
Generally, your client needs flood insurance if they are located in flood risk areas and if the federal government backs their mortgages. Flood insurance covers rebuild cost, the remaining amount in the mortgage, or a $250,000 coverage limit.
Your client must have flood coverage. The coverage is based on the smallest amount of these three.
So, when does your client need to get excess flood insurance?
Your client needs to get this insurance if the rebuild cost or mortgage amount of their home is above $250,000. Getting excess flood insurance is not a legal requirement, though.
Some lenders will still approve mortgage loans without this insurance. These lenders specialize in underwriting properties that don’t fit typical underwriting requirements.
However, your client should understand how excess flood insurance protects them from floods, especially if they’re located in flood-prone areas. Flood hazard areas have more than a 20% chance of experiencing a flood in 30 years.
Thus, your client is at risk of sustaining flood damage to their home. During these years, your client might have made some improvements. The cost of rebuilding a house could also be higher than the first few years after purchasing.
This would mean out-of-pocket costs for your clients. With the mortgage still in the loop, this situation is financially burdensome. Your client must carefully consider whether or not excess insurance flood is essential.
Excess Flood Insurance Coverage
This policy has the same coverage as that of standard flood insurance. It includes repair and replacement costs on damages brought by floods. The source of floods doesn’t matter. As long as your house gets damaged during a flood, you are covered.
Some policies may cover personal properties. However, there are properties or items not covered, especially those found in the basement. These properties have a higher risk of getting damaged during a flood.
Your client can also get coverage for income loss due to flooding, additional living expenses, and costs of flood preventive measures.
Fortunately, excess flood insurance doesn’t have a coverage limit, at least legally. Your client’s coverage would depend on the maximum set by the insurer, which could exceed millions.
Excess Flood Insurance Rates
Rates for Commercial Excess Flood Insurance New York vary from one provider to another. These providers use different criteria to determine the premium rates. Thus, your client must know what these criteria are.
- House elevation above the water level
- The distance of your client’s house from the nearest source of floods, such as a sea or river
- Structure of your client’s house
- Construction materials used in building the house
Alternate Option
Your clients can have excess flood insurance plus an NFIP coverage. But, there’s another option available: Completely Private Flood Coverage. The coverage is the same, but there are some differences.
One, your client enjoys a shorter waiting period compared to the standard NFIP/excess flood insurance. Sometimes, there’s no waiting period. Still, this period varies between insurers.
Two, your client will only have one policy and one claim to think of. They get one bill for annual premiums. Moreover, the rates might be a little cheaper than the two policies combined. However, this might not be true in every insurer.
Three, your client can cancel the whole policy whenever they want to. With the standard and excess flood insurance, only the excess flood policy is cancellable since this is private insurance.
Will this be an alternative for your clients? It still depends on their need. Your client must understand the risks involved.
Sometimes, the NFIP coverage is more than enough if your client’s house is less than $250,000. However, for your wealthy and well-off clients, this amount could be insufficient, especially if they possess expensive personal properties in their house.
Regardless of the type of insurance your client gets, the important thing is the coverage. The insurance should cover the whole amount of probable costs of rebuilding, replacing, or repairing a damaged house.
About Snyder Specialty
Snyder Specialty, LLC is a New York-based underwriting facility that provides a range of property and liability solutions for personal and commercial lines. Specializing in coastal properties and hard-to-place risks, Snyder Specialty expands your current capabilities with proven solutions for complex risks. Find out more about the company’s range of services by calling (718) 362-8039.
