The year 2020 set many records with a global pandemic, civil unrest, contested political election, and 22 separate billion-dollar weather and climate-related disasters. Climate.gov reported “the billion-dollar events of 2020 included a record 7 disasters linked to tropical cyclones, 13 to severe storms, 1 to drought, and 1 to wildfires. The 22 events cost the nation a combined $95 billion in damages.” Unfortunately, meteorologists are already predicting another above-average hurricane season for 2021. How do we prepare our clients?
Flood is the most common peril and the most uninsured.
According to FEMA, “floods are the nation’s most common and costly natural disaster and cause millions of dollars in damage every year. Floods cost America, on average, $8.2 billion each year.” So, why are 9 out of 10 homes not insured for flood damage?
Let that sink in. Only 10% of U.S. homeowners purchase flood insurance.
That means 90% of homeowners are left uninsured.
Is this due to a lack of understanding of the need for flood insurance? And how do we bridge this knowledge gap?
Most clients think flood is included in their homeowner’s policy. Clients may not understand that homeowner’s and renter’s insurance typically exclude flood damage.
It is only when they have a loss, they become educated.
Another common misconception by clients: Only people that live near water need flood insurance.
While the risk of having a flood is greater the closer your property is located to a body of water, that does not mean you are not at risk. According to claims data from FEMA, more than 20% of flood claims come from properties outside the high-risk flood zone. That is a substantial number of claims dollars allocated to flooding in low-risk areas.
“I’m not in a flood zone so I don’t need insurance.” I am sure, as agents, we’ve all had that said to us.
Here is a myth buster we as insurance agents know but our clients do not, everyone is in a flood zone. I will say it again, everyone is in a flood zone. The difference is whether you are in a low-risk or high hazard zone. Everyone should consider purchasing flood insurance and understanding the options available to them.
Clients may think flood insurance is too expensive. They are not in a high hazard zone and not required by their mortgage company to purchase the insurance, so they will save the money.
Self-insured is the route 90% of homeowners are taking right now – but are they really prepared to spend about $27,000 to repair flood damage?
That is the estimated damage cost according to FEMA for an average 2500 square foot home with 1 inch of water in the home.
One inch of water! Twenty-seven thousand dollars!
1 inch is not a lot of water, but it equates to significant out-of-pocket costs to the typical US household.
It is during catastrophic events that we see a spike in errors and omissions claims against agents.
Clients who are facing a significant financial loss look to insurance to make them whole again. You can help mitigate your risk by documenting to the client that their property policy does not cover flood damage.
You could even go a step further and set up a practice of offering a flood insurance quote with every renewal and new business opportunity.
Be sure not to forget two of the most important risk management tools, get coverage declinations from clients in writing and be consistent.