This post is part of a series sponsored by AgentSync.
The 2024 hurricane season just ended and officially ended on November 30, 2024. As of this writing, two major storms have made news and broken records (Hurricanes Helen and Milton). Although the official 2024 “hurricane season” has ended, it’s never too early to prepare for 2025, as tropical storms and cyclones can strike at any time. About hurricane damage still in the news And best of all, your insurance company is likely answering your customers’ questions about coverage, including what’s included, what’s covered, what’s excluded, and what other coverage you need.
If you are a licensed producer, agent, or insurance broker, you are likely already well trained in these topics. But who doesn’t like a refresh? Plus, if you think this information is valuable, you can always share it with your clients so they can answer their questions quickly and easily. Read below to learn what clients need to know about standard homeowners insurance, flood insurance, and the differences between them.
Homeowners Insurance and Flood Insurance: Understanding the Basics
Most homeowners think their standard insurance policy covers all water-related damage, but this dangerous misconception can leave them facing catastrophic losses. As a trusted insurance advisor, you play a key role in helping your clients understand these two different types of coverage and why they need both.
What Homeowners Insurance Usually Covers
While all insurance is different and legal requirements may vary by state, this is a quick overview of some of the most common coverages on a standard homeowners insurance policy.
- Wind damage from hurricanes
- Rain enters through wind-damaged windows and roofs
- Damage to structures caused by trees
- lightning strike
- fire damage
- Damage to personal property due to covered perils
- Additional living expenses if your home becomes uninhabitable due to a covered loss
Notably, what’s missing from this list is “flood.” That is, water that enters your home from outside, rather than damage to the structure due to physical impact from wind or falling trees.
What Flood Insurance Usually Covers
There are several types of flood insurance, including insurance managed through the National Flood Insurance Program (NFIP), private insurance companies, and parametric style flood insurance. Coverage limits and premium prices may vary, but flood insurance typically covers:
- Increased water levels due to storms or overflowing bodies of water
- high tide
- Ground collapse due to flooding
- mudflow
- Stagnant water damage
- Foundation damage due to flooding
- Personal property damage due to flooding (if you purchase content coverage)
As you can see, typical homeowners insurance offers little protection against damage caused by water inside your home compared to flood insurance. Consumers who don’t understand the distinction may be shocked to learn that their insurance won’t cover them if water enters their home and causes major damage to it and its property.
Why inland customers need flood insurance too
While it may be easy to convince clients who own coastal properties of the need for a separate flood insurance policy, inland homes are also at increased risk of flooding and should be considered when making decisions. It is important to communicate these risks to your clients. Accept or reject flood protection.
Urban flood risk: Modern developments are creating new flood risks inland. When a client says, “But I don’t live near water!” Let me remind you of the following:
- Concrete and asphalt prevent natural ground absorption
- Stormwater drainage system may be punctured
- ‘Flash floods’ can occur anywhere when heavy rain falls
- Nearby construction could change historic water flow patterns
Climate change and growing impacts: Recent years have shown that past flood data may no longer predict future risks. For example, climate change has the following effects:
- Extreme weather events are now occurring more frequently, even in places where they have not historically occurred.
- More intense rainfall occurred
- cause changes in seasonal precipitation patterns
- Create new flood zones in previously “safe” areas
After all, no matter where you live, it only takes one particularly heavy rain to destroy your property’s water storage system and cause flooding. Once homeowners understand this and understand that traditional homeowners insurance will not cover them, the need for a flood insurance policy becomes clearer.
Flood damage and flood damage
One of the most important concepts to explain to clients is the distinction between water damage (which may be covered by homeowners insurance) and water damage (which requires separate flood insurance). Here are some practical examples you can share with your clients.
Examples of water damage covered by homeowners insurance:
- Trees fall off roofs during hurricanes, allowing rain to enter
- The wind breaks the window and water comes in.
- Pipes burst during freezing
- Wind-driven rain enters through existing openings
On the other hand, these examples would not fall under standard homeowners insurance and would require flood insurance coverage.
- Storm surge caused by hurricane
- river flooding
- Flash flood due to heavy rain
- groundwater infiltration
- Rise of water from any source
Clarifying the distinction with coverage examples
To help clients understand these differences, let’s look at two examples that may be covered in different scenarios.
1. Hurricane damage
If a hurricane makes landfall and passes through your client’s home, the following damage can occur:
- Strong winds peel off roof shingles
- Rain seeps in through the damaged roof
- The first floor flooded due to high tide (only covered by flood insurance)
- A tree falls on a house and damages property.
- Mold grows due to flooding (applicable only to flood insurance)
Homeowners insurance covers some of these losses, but only flood insurance can cover damage from storm surge and mold. Without flood insurance, customers can find themselves in this situation, resulting in large gaps in coverage and large out-of-pocket costs.
2. Heavy rain
In this case, there is no hurricane, but heavy rain that lasts an entire week will cause the following damage to your home:
- The gutters of the house are overflowing and the roof is leaking.
- The ground around the house becomes saturated and water seeps into the basement
- A nearby stream floods
- The sump pump in my house broke down.
In this case, a standard homeowners policy may offer little protection to the customer. You may be able to add a rider to your policy, such as a “sump pump backup,” but only flood insurance can cover damage caused by saturated ground or flooding of streams and rivers.
General Flood Insurance Exclusions and Limitations
At this point, your client may be thinking that flood insurance is a great idea and that having flood insurance will ensure that you are fully covered for any water-related event that may occur. However, it is important to remind you that all types of insurance policies have exclusions and limitations. Flood insurance is no exception.
We have already mentioned the most common homeowners insurance exclusions related to water damage and flood damage. For flood insurance, the following may also be excluded:
- Temporary housing and additional living expenses (especially for plans using the NFIP)
- Damage to decks, patios, and other structures located off the property of the home.
- Personal property stored in the basement
- currency and valuable paper
- cars and other vehicles
- Landscaping and exterior improvements
Still, even with these exclusions, if a customer faces a catastrophic event, flood insurance can provide hundreds of thousands of dollars in coverage at a relatively low annual price.
Special considerations for flood insurance and homeowners insurance
Be sure to understand the finer points and be able to explain these types of details to your customers before they buy. This is not a complete list, but some common considerations include:
Specifying a storm deductible on homeowners insurance
Many homeowners insurance policies have special deductibles for certain storms and hurricanes, often calculated as a percentage of your dwelling coverage rather than a flat amount. So if a hurricane knocks down a tree on a customer’s home, causing the roof to collapse and allow water to enter, the homeowner may have to pay a much higher deductible than what’s listed on their homeowner’s insurance policy. There is a gender.
Flood insurance waiting period
With a few exceptions, such as purchasing a new home, flood insurance typically tells customers there is a 30-day waiting period before coverage becomes effective. This means you can’t wait until the storm approaches to buy insurance.
Comparing NFIP and private flood insurance
The NFIP provides most flood insurance in the United States, but private flood insurance options are also increasing. Each has its own benefits and limitations (low or high premiums, coverage limits, etc.) that should be discussed with the customer.
Best practices for client education
These tips don’t just apply to homeowners or flood insurance, but they’re worth repeating. As a licensed insurance agent or insurance producer, be sure to implement these best practices.
- Check your coverage annually, especially before seasons that affect your specific geographic location (hurricane season, wildfire season, tornado season, etc.).
- Explain coverage differences using visual aids
- Provide a working example of a billing scenario
- Documented scope discussion and recommendations
- Help customers understand flood zones and real risks
- Explaining the cost-benefit analysis of flood insurance even in low-risk areas
As extreme weather events become more common, helping customers understand the difference between homeowners and flood insurance is not only good customer service, but also important risk management. By clearly explaining these differences, helping your clients make informed decisions about their insurance needs, and documenting these conversations and their results, you can improve your client’s financial future and yours. You can protect both your financial future and your agency’s reputation.
Management of insurance companies in areas with high flood risk
Homeowners insurance is experiencing a crisis Similar situations are occurring across the United States, as more frequent and severe weather events have caused some insurance companies to stop selling certain policies or exit many state markets altogether. . At the same time, private (often specialized) carriers are increasingly offering flood insurance, including: The future of NFIP is uncertain. Therefore, it is more important than ever for insurers, agents, and MGAs/MGUs to have a tight sales management strategy to ensure every opportunity to sell both homeowner and flood insurance policies. It has become.
What does that mean? Simply put, the ability to gain insight into distribution channels, manage them, and fine-tune them as needed is essential to a company’s survival. Because the targets for which products can be sold and where are constantly changing, organizations with flexible and rapidly scalable distribution channels can win where others cannot.
For example: Does your insurance agent accurately and transparently know where every producer is licensed (and under which LOA) in real time? This allows you to focus on the most profitable regions and business areas while minimizing profits. What is the cost of maintaining a license in a state where the risk is so high that you cannot sell insurance?
Or, if you are an insurance company, do you have full knowledge of how many producers are appointed to sell your product in each state? You could be wasting tens of thousands of dollars in state appointment fees in a market with no appetite for writing business.
If this kind of intelligence into your distribution channels sounds complicated, see how AgentSync makes it simple. We’ve also created some guiding resources to help you assess the current state of your distribution management strategy and execution.
download Distribution management evaluation Join us today to gain insight into your personal strengths and opportunities for improvement. Or, if you’re ready to take action, inquiry To get started.
Topics
catastrophe
natural disaster
flood
hurricane
homeowner
