The peril of flood is excluded from virtually all policies providing property coverage. The National Flood Insurance Program is a government-sponsored program established to make flood insurance available to property owners in qualified or flood-prone areas.
This program is currently administered by the Federal Emergency Management Agency (FEMA). Flood insurance policies are issued by the government and private insurers in a partnership between the federal government and the private insurance industry. The purpose of the program is to make flood coverage available to the owners of property in flood-prone locales.
Cities, towns and counties generally participate by adopting and enforcing FEMA-approved floodplain management ordinances. Only those persons in an area prone to floods and designated as such by the NFIP may purchase flood coverage. The federal government has designated various areas as those located in a “flood plain” or “flood zone”.
During the initial thirty days that flood insurance is available to a new community, policies written may become effective sooner depending on FEMA rules at the time. A policy issued is generally subject to a standard 30-day waiting period with limited exceptions such as loan closings or map revisions.
There are two programs provided by the National Flood Insurance Program (NFIP):
Goes into effect as soon as a community has met its land use control requirements stipulated by the federal law. Rates may include legacy subsidies by the federal government under the Emergency Program, and the following are the only limits offered:
Building:
Contents (per unit):
Becomes effective once a flood insurance rate map is prepared that divides the community into specific zones to determine the probability of flooding in each area and the community agrees to adopt more stringent flood control and land use measures. Rates are no longer subsidized, and the following limits are offered:
Building:
Contents (per unit):
The policy also covers the removal of debris. Property removed is covered at its new location for up to 30 days on a named peril basis. Debris removal is covered, including debris deposited by flood, though it does not include trees, shrubs, or landscaping materials.
The insuring agreement of the flood policy provides coverage for the peril of a direct physical loss by or from a flood. The actual definition of a flood as it actually appears in the policy is as follows:
“A general and temporary condition of partial or complete inundation of normally dry land area resulting from the overflow of inland or tidal waters or the unusual and rapid accumulation or runoff of surface waters from any source. To meet the FEMA Standard Floor Policy –SFIP– definition of a flood, there must be inundation of two or more acres of normally dry land or two or more properties due to overflow, surface runoff, or mudflow. Flood may also include mudslide, mudflow, surface runoff flood related erosion of shorelines or lake overflow that are caused by the accumulation of water on or underground. Mudslide is not covered. Mudflow: This is covered under flood insurance. It refers to water-saturated soil moving as a liquid, almost like a river of mud. NFIP policies treat mudflow as a type of flood because the movement is driven by water. Mudslide: This is not covered by flood insurance. A mudslide is considered an earth movement, similar to a landslide, where earth or debris slides downhill mainly due to gravity rather than water flow. Homeowners policies also exclude this type of loss.”
The description “general condition” means that the flood must be a condition of that geographical area. The policy does not cover water damage coming from the insured’s own property. In addition, the policy will not cover damage caused by a broken or stopped-up sewer, a faulty sump pump, earthquake damage, landslide damage, or accumulation of water on an insured’s property due to the formation of the land.
As with any property policy, flood insurance has deductible. It is separately applied to building and contents under the flood insurance policy. There are two minimum deductibles available for the NFIP policy. If the exposure is considered by the NFIP to be low risk, the standard deductible is $500. If the exposure is considered high risk, the standard deductible is $750. Higher deductibles are available in order to reduce premium. These deductibles range from $1,000 to $5,000 (in increments of $1,000).
The following are excluded from coverage:
Mobile homes may be insured with the same type of protection that is included in a homeowners policy. This coverage, however, is modified by several unique provisions. In general, an MH policy will provide property and liability protection in a similar fashion to that found in a homeowners’ policy form, except that the exposure (the mobile home) is different.
To be eligible for mobile home coverage, the home must be designed for portability and year-round residential living. Under older guidelines, the minimum size requirement was at least 10 feet by 40 feet.
Under current requirements, the unit must qualify as a HUD-compliant manufactured home, meaning it was built after June 15, 1976 and designed for residential occupancy. This requirement prevents small campers or travel trailers from being insured as a “home.”
The mobile home must be constructed on a permanent frame and originally manufactured with wheels. Units that are permanently attached to a foundation may be eligible for coverage only in certain situations, depending on the policy and insurer.
Coverage A provides protection for the mobile home described in the declarations. Structures not attached to the mobile home are generally not covered. Coverage is also provided for personal property and additional living expenses. $500 of coverage is provided for removal when it is endangered by a covered peril.
A transportation endorsement is available, which covers damage caused by collision, upset, stranding, or sinking while the mobile home is being moved to a new location. Once the move begins, the policy will cover these perils for up to 30 days while in transit.
Watercraft property coverage may be obtained to protect against damage by covered perils to an insured’s boat or yacht. A homeowners’ policy provides only limited protection for watercraft. Therefore, boat owners need more comprehensive protection for greater exposure. Liability incurred as a result of the operation or ownership of watercraft is generally excluded by homeowners’ policies. Boat owner policies cover the following:
A Boat Owners Policy is a package type policy providing property insurance for the insured’s boat and liability protection if the insured is legally liable for bodily injury or property damage to others arising out of its operation, maintenance, or use (although liability for small crafts may be endorsed to a homeowners policy). Property losses are settled on an ACV basis and are subject to a deductible. Coverage is generally provided on an all-risk basis. Someone who owns a sailboat that is longer than 26 feet without inboard power may secure coverage under this policy.
Coverage for this peril may be added to some property insurance policies by endorsement. This endorsement generally modifies the earth movement exclusion of most property insurance forms. Coverage is provided for loss to insured property resulting from earthquake or volcanic eruption (does not cover flood or tidal waves generated by these perils). Damage to land is also not covered. Losses will be subject to a deductible. Most property policies now provide coverage for volcanic eruption under the earth movement peril. With regard to most personal lines policy forms, any volcanic eruptions that occur within any 72-hour period will be considered a single or the same occurrence.
This type of property insurance was developed many years ago to provide protection for goods or products being transported from place to place. As this type of insurance evolved, the National Association of Insurance Commissioners (NAIC) proposed a “Nationwide Definition” with regard to marine insurance protection. This definition recognized the following classes of property as those eligible to be covered by marine insurance:
A risk must include an element of transportation to be eligible for an Inland marine contract. The property must be in transit, be held by a Bailee, be at a fixed location that is considered an important instrument of transportation or be a transportable property which is often different locations.
These all risk forms cover shipments of goods by air, rail or motor carrier. They may also cover the legal liability of the carrier against loss or damage to the merchandise. Goods in transit may be covered in one of two methods depending on whether a common carrier or the insured’s own trucks are being used. An annual transit policy may be used to cover all shipments in a single year when a common carrier is used. Another type of transit policy available to cover single shipments is a trip transit policy. If goods are shipped on the property owner’s trucks, a motor truck cargo policy is used. It functions similarly to the annual transit policy, except the owner of the goods, as mentioned, is using its own trucks, and it is subject to a coverage limit on any one truck in any one place, with a further coverage limit on any one disaster.
A dwelling fire policy provides protection against covered losses as a result of fire, lightning, extended coverages, and several other perils. There is no coverage under a property insurance policy for an insured’s legal responsibility for bodily injury (BI) or property damage (PD) to others arising out of personal activities. Therefore, this exposure may be insured if a person purchases a Comprehensive Personal Liability (CPL) policy. This type of personal liability policy is included as Section II of a homeowners policy.
Under the CPL policy, as in the homeowners Section II coverage, the named insured includes:
According to a CPL policy, the insured location is:
There are two sections of coverage that are identical to Coverage E and F in a homeowners policy.
The CPL policy has some additional coverages, including:
Supplementary Claim Expense
First Aid Expense
Loss Assessment
Damage to the Property of Others
Exclusions
Umbrella and Excess Liability
The National Flood Insurance Program (NFIP) provides subsidized flood insurance to property owners in flood-prone areas, administered by FEMA.
Residential buildings are classified into 1–4 family dwellings and Other Residential (5+ units), with differing building-limit maximums.
The flood policy covers direct physical loss by or from flood, with specific definitions and exclusions:
Other property insurance forms include:
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