With all of the horrifying pictures in the news of flooded cities around the country, you might be thinking about flood insurance. If you have it, do you have enough? If you don’t have it should you purchase it?
Your insurance broker may have tried to sell you a flood insurance policy in the past, but you had a good reason to decline the coverage. After all, who wants to pay for something you don’t really need?
That’s probably what all of those businesses in Houston thought, too. Here are some (not so) good excuses for declining to purchase flood insurance.
Your Bank Doesn’t Require It
Maybe you don’t have a mortgage on your property. Or perhaps, because of location, you aren’t required to have flood insurance to secure or maintain your mortgage. Does that mean you shouldn’t purchase the coverage?
While bank flood requirements account for a large portion of flood insurance policies sales, even those without mortgages or those who are not required to purchase coverage should still consider flood insurance policies. Why? Because even properties where flood insurance isn’t required are still subject to flooding. If you are in a flood plain (or even if you aren’t) floods may still occur and you could be affected.
Your Bank Purchased Flood Coverage “For You”
Bank provided insurance (often called force-placed insurance) is when the bank either offers to insure your property or forces the coverage on you because you have failed to provide your own. Some may find this option more convenient than shopping for your own policy, but be warned: force-placed coverage does not benefit you in the ways that count.
This coverage is often more expensive, and the cost of the policy is passed on to you with your mortgage payment. However, in the event of a claim, your mortgage might get paid off but there is no money left to rebuild or purchase a new property without a new loan and down payment. Force-placed coverage isn’t for you, it’s for your bank, to cover their investment.
It Doesn’t Offer Enough Coverage
With limits of only $500,000 for commercial buildings and $500,000 for personal property in those buildings, NFIP limits are just a drop in the bucket for most commercial property owners. Why bother to buy flood coverage that is just a fraction of what it would cost to replace the building?
In many cases, the NFIP coverage is just an underlying amount. Building values in excess of $500,000 should be covered by an excess flood policy. NFIP will pay for the first $500,000, then the excess flood policy covers the remainder. The excess policy is typically at a much lower rate since they aren’t picking up the initial part of the claim.
Flood insurance should be a part of every business insurance portfolio. Talk to your Hayes Broker about flood insurance today to find out how a flood insurance policy could protect your business.