Rising real estate: Shore up clients’ protections A home or business can be your clients’ most valuable asset. In the event of a flood, that asset is at significant risk of damage or, in severe cases, total loss. Historically, just an inch of water can equate to tens of thousands of dollars in damage.1 Purchasing flood insurance is a primary defense against such devastating loss—and knowing the appropriate amount of flood coverage to buy is critical for property owners to be able to recover quickly. The real estate market has been booming since the pandemic began—with home prices rising as much as 30% in some cities,2 and 15.8% on average in 2021.3 After a slight dip at the beginning of the pandemic, commercial real estate pricing also has been on a steady growth rate, in the mid-single digits. This trend is expected to continue through the end of 2022.4 Higher residential and commercial real estate prices, coupled with an ongoing rise in the cost of materials and labor, mean increased replacement cost value for homes and businesses. Now is a good time to assess whether your clients’ flood insurance needs are being met under their current coverage.
Why excess coverage may be a good choice for your clients Most homeowners insurance does not include flood coverage, so flood insurance must be purchased separately. Primary flood insurance can be obtained through FEMA’s National Flood Insurance Program, which is distributed by a network of over 50 insurance companies called Write-Your-Owns and the NFIP Direct, which allows enrolled agents to offer flood insurance to their clients directly from FEMA. Underwritten by the federal government, the NFIP provides flood insurance to homeowners, renters and businesses. There also are many private primary flood insurance options available through the insurance marketplace. [EDITOR’S NOTE: PIA members can offer their clients’ personal and commercial flood policies through Hartford Flood.] Excess flood insurance is widely available, and supplements primary policies offered through the NFIP or private insurance. If the property is insured under the NFIP, excess coverage is available once property and contents values are maxed out (see chart on page 16), and it should be offered to clients
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when a house or business property is valued over those limits. Maximum NFIP residential building coverage limits are $250,000. To provide more context around the benefits of including excess flood as part of the overall flood insurance package for a residential property, the median home prices across the United States are increasing rapidly. According to the National Association of Realtors, the median U.S. house price rose to over $350,000 as of January 2022.5 This is an increase of 15.4% year-over-year.6 To ensure a home is protected, it is imperative excess flood is included in the equation. For example, take Collier County, Fla., an area that borders the Gulf of Mexico. Home prices rose by 14.4% year-over-year with a median home price of over $435,000.7
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MELISSA LEUCK SVP, sales & client relationship leader, Torrent Technologies Inc.
Based on current NFIP maximums, the values of many houses and businesses exceed primary coverage limits, so excess insurance is not only a good option, but may be a necessary consideration. Similarly, if the property is insured through a single carrier—outside of the NFIP— excess coverage can be added easily to your client’s insurance and should be considered when primary flood insurance coverage is not sufficient to cover a total loss.
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