Building Flood: Is Private Insurance Your Best Option?
Flood Insurance Coverage: Part 2 of 3
As discussed in Flood Coverage Part 1 of 3, you know you have a building in a flood zone through the flood map, and you know how deep the building is in that flood zone because you have an elevation certificate. Now it’s time to make the private flood or
With our clients, we always recommend the private route if possible and we do this for the following three reasons:
- Private flood coverage is not limited “by building.” NFIP has limitations depending on the type of building—condo, residential, commercial garage—and these limitations are by building. In the private market, you can purchase a limit for a group of buildings. If one building is closer to the flood source and sustains more damage, that building can get more funds for recovery under private insurance and not be limited by building.
- Private flood can include Loss of Business Income or Loss of Rents. These coverages are critical after a flood, as it often takes time to fix the damage. NFIP doesn’t provide this limit in their program. In real estate, tenants must move to another location during the repair time after a flood, and the tenant may not come back. Loss of Rents provides a replacement for this lost income. You can also structure it to provide income replacement after the building is repaired and you’re looking to re-tenant the unit.
- Private flood is not subject to certain time and government constraints for binding. The NFIP has a 30-day waiting period for new policy coverage unless there’s a lender requirement (e.g. loan closing). Private flood insurance can start immediately. Private flood insurance is also not subject to government shutdowns that will close the program and stop all new coverage, which actually happened for three days just this year.
After reading the items above you may say to yourself why would we not get private flood coverage? Those reasons are twofold:
- There is not a private carrier that can give terms that acceptable either via very high deductibles or limiting what they will cover under “flood” and
- It is cost prohibitive.
If this happens now is the time to learn about the NFIP which will be covered in part 3, but if the terms and price are right the private option for
What’s the best flood insurance option for your commercial real estate company? Contact us and our team will help you find the best solutions for your needs.
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- Flood Safety Checklist
- Yes, You Can Prepare for Natural Disasters
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