Do your customers know the difference between home insurance and flood insurance this hurricane season?

This article is part of a series sponsored by AgentSync.

The 2024 hurricane season has just concluded, officially ending on November 30, 2024, and as of this writing, two major storms have made news and broken records (Hurricanees Helen and Milton). Although the official 2024 “hurricane season” is over, tropical storms and cyclones can strike at any time, and it’s never too early to prepare for 2025. , insurance companies may deploy their insurance customers’ questions about coverage, including what they have, what is covered, what is not covered, and what additional coverage they may need.

If you are a licensed producer, agent, or insurance broker, we know you are already well-trained in these topics. But who doesn’t like a refresher? Plus, if you find this information valuable, you can always share it with your customers to help answer their questions quickly and easily. So read on to learn what your clients need to know about standard homeowners policies, flood insurance policies, and the differences between them.

Home Insurance vs. Flood Insurance: Know the Basics

While most homeowners believe that their standard policy covers all water-related damage, this dangerous misconception can leave them open to catastrophic losses. As their trusted insurance advisor, you play a vital role in helping your clients understand these two different types of insurance and why they may need both.

What Home Insurance Typically Covers

While every policy is different, and legal requirements may vary from state to state, here is a brief overview of some of the most common coverages available with a standard homeowners insurance policy.

• Wind damage from hurricanes
• Rainwater entering through wind-damaged windows or roofs
• tree damage to buildings
• lightning strike
• fire damage
• Covers personal property damage caused by hazards
• Additional living expenses if the home becomes uninhabitable due to a covered loss

Notably missing from this list is “flood.” That is, any water that enters the home from the outside is not damaging the structure due to wind or the physical impact of a fallen tree.

What flood insurance typically covers

There are many types of flood insurance, including policies administered through the National Flood Insurance Program (NFIP), private insurance companies, and parametric flood insurance policies. Coverage and premiums may vary, but a flood insurance policy should generally cover:

• Rising water levels due to storms or water overflows
• storm surge
• Ground collapse due to flooding
• mud flow
• water damage
• Flood damage to foundation
• Personal property damage due to flooding (when you purchase property insurance)

As you can see, typical homeowners insurance offers very little protection against water damage inside your home compared to flood insurance. Consumers who don’t understand the difference may be surprised to learn that they are not covered when water enters the home and wreaks havoc on it and its contents.

Why Your Outback Customers May Also Need Flood Insurance

It may be easy to educate clients on coastal properties about their need for separate flood insurance, but inland homes also face increasing risks of flooding, so it’s important to communicate these risks to clients when making their decision to accept or decline flood protection. .

Urban flood risk: Modern development brings new flood risks to inland areas. When your customers say “But I don’t live near water!” remind them:

• Concrete and asphalt prevent natural absorption by the ground
• Storm drainage systems may be overwhelmed
• “Flash floods” can occur anywhere during heavy rain
• Nearby construction can alter historical water flow patterns

Climate change and increasing impacts: Recent years have shown that historical flood data may no longer predict future risk. For example, climate change has:

• Leading to more frequent extreme weather events, even in places where they have never occurred historically
• causing more intense rainfall
• Causing changes in seasonal precipitation patterns
• Create new flood zones in previously “safe” areas

The bottom line is, no matter where you live, it only takes one particularly heavy rainfall to overwhelm a home’s waterproofing system and cause flooding. When homeowners understand this and understand that traditional homeowners insurance policies no longer suit them, the case for a flood insurance policy becomes even more obvious.

Floods and Flood Disasters

One of the most important concepts to explain to clients is the difference between water damage (which may be covered by homeowners insurance) and flood damage (which requires separate flood insurance). Here are some practical examples to share with clients:

Examples of flood damage that may be covered by a homeowners insurance policy:

• A tree falls off a roof during a hurricane, letting rainwater in
• The window was blown open, letting water in
• Pipes burst during freezing
• Wind and rain enter through existing openings

On the other hand, these examples are not covered by a standard homeowners policy and require flood insurance:

• storm surge from hurricane
• river overflow
• Heavy rain triggers flash floods
• groundwater seepage
• Rising water levels in any water source

Clearly differentiate with coverage examples

To help customers understand these differences, let’s look at two examples to get an idea of ​​what might be covered in different scenarios.

1. Hurricane damage

If a hurricane makes landfall and passes through a customer’s home, the following types of damage may occur:

• Strong winds blew off shingles from the roof
• Rainwater entering through damaged roof
• Storm surge inundates ground floor (only covered by flood insurance)
• Trees fall on houses, damaging property
• Flooding causes mold growth (only covered by flood insurance)

While homeowners insurance can cover some of these losses, only flood insurance can cover damage caused by storm surge and mold. In this case, without flood insurance, the customer would have a huge gap in coverage and could incur large out-of-pocket costs.

2. Heavy rainfall

In this case, there was no hurricane, but a full week of heavy rain caused damage to the home, including:

• Home’s gutters overflow, causing roof to leak
• The ground around the house becomes saturated and water seeps into the basement
• Nearby local creek overflows
• The sewage pump at home is broken

In this case, a standard homeowners policy may leave the customer little to no protection. Additional riders may be added to the policy, such as “sump pump backup,” but only flood insurance will cover damage caused by saturated ground and overflowing creeks and rivers.

Common Flood Insurance Exclusions and Limitations

At this point, your client may decide that flood insurance is a good idea and having flood insurance will ensure that they are fully covered for all possible water-related events. But it’s important to remind them that each type of insurance has exclusions and limitations. Flood insurance is no different.

We’ve mentioned the most common home insurance exclusions related to water damage and flood damage. For flood insurance policies, it may also exclude:

• Temporary housing and additional living expenses, especially if your plan is implemented through the NFIP
• Damage to decks, patios, and other outbuildings outside of the home’s footprint
• Personal property stored in basement
• Currency and Instruments of Value
• cars and other vehicles
• Landscaping and exterior improvements

Still, even if these exceptions are excluded, flood insurance can provide hundreds of thousands of dollars in coverage for a relatively low annual fee if a customer faces a devastating event

Special Considerations for Flood and Home Insurance

Make sure you’re familiar with the fine print and can explain these types of details to your customers before they buy. This is not a complete list, but some common considerations include:

Specified Storm Deductibles in Home Insurance

Many homeowners policies have special deductibles for specified storms or hurricanes, often calculated as a percentage of the dwelling’s coverage rather than a fixed amount. So if a hurricane causes a tree to fall on a customer’s home, damaging the roof and allowing water to enter, the homeowner may be required to pay a higher deductible than listed on the homeowner’s policy.

Flood insurance waiting period

Customers are reminded that there is generally a 30-day waiting period for flood insurance to become effective, with limited exceptions such as purchasing a new home. That means they can’t wait until a storm hits to buy insurance.

NFIP and private flood insurance

While NFIP provides the majority of flood insurance policies in the United States, there are a growing number of private flood insurance options. Each policy has its own benefits and limitations, such as lower or higher premiums and coverage limits, which you should discuss with your client.

Customer Education Best Practices

These tips don’t just apply to homeowners and flood insurance, but they’re worth repeating. As a licensed insurance agent or manufacturer, make sure you put these best practices into practice.

• Review coverage annually, especially before seasons that affect your specific geographic location (hurricane season, wildfire season, tornado season, etc.)
• Use visual aids to explain coverage differences
• Provide real-life examples of claims scenarios
• Document coverage discussion and recommendations
• Help clients understand their flood zones and actual risks
• Explain the cost-benefit analysis of flood insurance, even in lower-risk areas

As extreme weather events become more common, helping customers understand the differences between home insurance and flood insurance is not just good customer service, it’s important risk management. By clearly explaining these differences, helping clients make informed decisions about their coverage needs, and documenting these conversations and their outcomes, you can protect your clients’ financial future, your own, and your agency’s reputation

Insurance producers managing high flood risk areas

Home insurance across the U.S. is experiencing a crisis as more frequent and severe weather events prompt some insurers to stop selling certain policies or withdraw from many state markets entirely. At the same time, with the future of the NFIP uncertain, private (often specialty) carriers are increasingly offering flood insurance. This makes it more important than ever for insurers, agents and MGAs/MGUs to develop rigorous distribution management strategies to ensure they seize all available opportunities to sell home and flood insurance.

what does that mean? In short, a deep understanding of your distribution pipeline and the ability to manage that pipeline and pivot quickly when needed is critical to your company’s survival. Because what products can be sold and where are ever-moving targets, organizations with flexible and rapidly scalable distribution pipelines will win at the disadvantage of other organizations.

For example: Does your insurance agency have instant, accurate, and transparent visibility into where each of your producers is licensed (and in which LOAs) so that you can focus your efforts on the most profitable geographies and business areas? , while minimizing losses and the cost of maintaining a license in a state where the risk is so high that policies cannot be sold?

Or, if you’re an insurance company, do you fully understand how many manufacturers each state is designated to sell your product? If not, you could be wasting tens of thousands of dollars in national designation fees in markets you have no interest in doing business while ignoring opportunities in other regions.

If this type of distribution pipeline intelligence sounds complicated, learn how AgentSync makes it simple. To help evaluate the current state of your distribution management strategy and execution, we’ve also created a resource to guide you.

Download our Distribution Management Assessment today to gain insights into your personal areas of strength and opportunities for improvement. Or, if you’re ready to take action, contact us to get started.

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