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FLOOD INSURANCE 101

Doesn’t my Homeowners Insurance policy cover flooding?

The coverage offered in a Flood Insurance policy may sound like coverage you already have within your Homeowners policy, but that is not the case.  Flood coverage is different than your Homeowners insurance because most Homeowners policies specifically exclude water damage that results from rising water.  For insurance lingo, “rising” water distinguishes flood damage from water damage.

I don’t live near water. Do I need flood insurance?

If your property is identified as “high risk” (A and V flood zones), most lenders require you to have flood insurance.  Regardless, no one is without potential flood risk.  Wherever it rains, it can flood.  Since 25% of all flood claims are actually located outside of “high risk” A and V zones, only you can answer this question for your family.  You might consider the cost of insurance vs. the average paid claim to decide if you can afford to cover your own loss.

What is the average paid flood claim?

During the last five years, the average flood claim was $46,000.

What is the average flood premium?

The average cost of flood insurance is $700 per year.  But, because rates are based on many variables, including flood zone, coverage amounts and the elevation of your home, your premium will likely be far less if you are in a moderate to low risk zone.  A or V zones (high risk) are wide-ranging, but they average around $1,500 per year.

What types of events are considered “flood” events?

There are four primary causes of floods:

  1. River or coastal flooding, such as spring runoff, raising river levels or hurricane driven rains and tidal surges.
  2. Rapid runoff or buildup of water, such as torrential rains in low lying areas.
  3. Mudflow in inundated, normally dry areas.
  4. Collapse of water retention structures such as levees or dams, or erosion of coastal or lakeside seawalls and shoreline. Flooding can occur anywhere, whether along the shore, inland or at altitude.  Major events occur in every state in the US.

Won’t the Federal Government just bail me out if I don’t have flood insurance?

If your home is within a declared disaster area, you may apply to borrow up to $200,000 to repair or replace your primary home to its pre-disaster condition.  It’s actually a loan that must be paid back with interest and not always available.  You can’t use the loan to upgrade or add on to the home, unless required by building authority or code.  Second homes or vacation properties are not eligible to apply for this federal loan program.

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NEPTUNE FLOOD INSURANCE

How does a Neptune Flood Insurance Policy differ from a NFIP policy?

The Neptune flood policy provides the same coverage as the NFIP (National Flood Insurance Program).  The only difference would be greater or broader coverage in the event you selected additional coverage options available with Neptune, but not available through NFIP.  For example, NFIP flood insurance is limited to fixed building coverage and does not cover external structures or provide temporary living expenses if your home is uninhabitable.

What “greater” coverage limits are available with Neptune?

Neptune provides higher limits of coverage than the National Flood Insurance Program:

MAX. HOME COVERAGE MAX. CONTENT COVERAGE
NEPTUNE $1,000,000 $400,000
NFIP $250,000 $100,000

What broader coverage options are available with Neptune?

Neptune provides a variety of options so that each homeowner can customize coverage to waterproof their assets:

Basement Contents up to $10,000
Pool Repair & Refill up to $10,000
Unattached Structures up to $50,000
Temporary Living Expense up to $10,000

Is the waiting period with Neptune the same as the NFIP?

No.  Neptune provides a reduced waiting period of only 10 days vs. the 30-day waiting period under the NFIP. There is no waiting period when a Neptune policy is purchased for a loan closing.

Will the claims process be any different than under the NFIP?

Absolutely.  As you may have noticed, government processes are rarely simple or service oriented.  Neptune walks you through the process of reporting and resolving your loss as quickly as possible.  We deliver extraordinary service so you can focus on getting your life back.

What is my Deductible and how is it applied?

At Neptune, we offer seven deductible option ranging from $1K-$50K. Your deductible is the amount of money you pay before your insurance begins to pay. When a loss is covered under your policy, Neptune pays the part of the loss that exceeds your deductible amount, up to the limits of coverage you purchased.  The Deductible amount you select is shown on your Declarations page.  In each flood loss, the Deductible amount applies separately to Building (Coverage A) and Contents (Coverage B).

If I buy private flood insurance, then want to go back to the NFIP, will I be charged a higher rate?

In most cases, no.  The only circumstance where this might occur is if your home has been “Grandfathered”.  Grandfathering is when flood map changes occur and the National Flood Insurance Program (NFIP) provides a lower-cost flood insurance rating option known as “grandfathering.”  It is available for property owners who already have flood insurance policies in effect when the new flood maps become effective and then maintain continuous coverage.  If your rate with Neptune is lower than the current NFIP rate, it is highly unlikely your property is grandfathered.

Key definitions in a Neptune Policy

The following are key definitions that we use in our Policy:

  1. Actual Cash Value.  The cost to replace an insured item of property at the time of loss, less the value of its physical depreciation.
  2. Basement.  Any area of the Building, including any sunken room or sunken portion of a room, having its floor below ground level (subgrade) on all sides.
  3. Building.
    1. A structure with two or more outside rigid walls and a fully secured roof, that is affixed to a permanent site;
    2. A manufactured home (a “manufactured home,” also known as a mobile home, is a structure: built on a permanent chassis, transported to its site in one or more sections, and affixed to a permanent foundation);
    3. A travel trailer without wheels, built on a chassis and affixed to a permanent foundation, that is regulated under the community’s floodplain management and Building ordinances or laws.  (Building does not mean a gas or liquid storage tank or a recreational vehicle, park trailer, or other similar vehicle, except as described in B.3.c. above.)
  4. Cancellation.  The ending of the insurance coverage provided by this Policy before the expiration date.
  5. Declarations page.  A computer-generated summary of information you provided in the Application for insurance.  The Declarations page also describes the term of the Policy, limits of coverage, and displays the premium and our name.  The Declarations page is a part of your Flood Insurance Policy.
  6. Described location.  The location where the insured Building(s) or personal property are found.  The described location is shown on the Declarations page.
  7. Direct Physical Loss by or from Flood.  Loss or damage to insured property, directly caused by a flood.  There must be evidence of physical changes to the property.
  8. Dwelling.  A Building designed for use as a residence for no more than four families or a single-family Unit in a Building under a condominium form of ownership.
  9. Elevated Building.  A Building that has no Basement and that has its lowest elevated floor raised above ground level by foundation walls, shear walls, posts, piers, pilings, or columns.
  10. Improvements.  Fixtures, alterations, installations, or additions comprising a part of the insured Dwelling or the apartment in which you reside.
  11. Mudflow.  A river of liquid and flowing mud on the surfaces of normally dry land areas, as when earth is carried by a current of water.  Other earth movements, such as landslide, slope failure, or a saturated soil mass moving by liquidity down a slope, are not mudflows.
  12. Policy.  The entire written contract between you and us. It includes:
    1. This printed form;
    2. The Application and Declarations page;
    3. Any endorsement(s) that may be issued;
    4. Any renewal certificate indicating that coverage has been instituted for a new Policy and new Policy term.

Only one Dwelling, which you specifically described in the Application, may be insured under this Policy.

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BUYING FLOOD INSURANCE

What does a Flood policy cover?

The basic coverage options are for your building and/or your personal property, described in more detail below:

Coverage A – Building Property Coverage
What this typically provides coverage for:

  • the building and its foundation
  • plumbing and electrical systems
  • central air and heating systems
  • attached bookcases, cabinets and paneling

Detached garage (other detached structures need their own policy).  Typically paid out on a Replacement cost basis (what it would cost to rebuild the home) with a maximum limit available of $500,000

Coverage B – Personal Property Coverage
What this typically provides coverage for:

  • Clothing, furniture and electronics; curtains
  • Some portable appliances; freezers and the foods within them
  • Certain valuables like art (subject to a special limit)

Typically paid out on an Actual cash value basis (which is replacement cost minus depreciation) with a maximum limit available of $200,000

What’s not typically covered by Flood insurance?

Listed below are a few types of property and expenses that generally fall outside the scope of a basic flood policy.  Neptune can help cover many of the items shown, if you select optional coverages.

  1. Moisture or mold/mildew damage that “could have been avoided by the homeowner” (the lack of timely remediation).
  2. Currency and precious metals, and paper valuables like stock certificates.
  3. Outdoor property like decks, fences, patios, landscaping, wells and septic systems, and hot tubs and pools.
  4. Living expenses, like temporary housing (if flood damage makes your home uninhabitable).
  5. Cars and other self-propelled vehicles (but your auto insurance may offer some coverage for your car).
  6. Items in below-ground rooms like crawl spaces and basements.  Some items in these spaces (like the furnace) are typically covered under building coverage.  Others (like the washer/dryer) are usually covered under personal contents coverage.  And some items may not be covered at all when they’re kept in below-ground rooms.

Excess flood insurance is available through some insurers, and it might be a good option if you’re interested in increasing the limits available from a Neptune Flood Insurance policy.