exam3notes - Chapter 6 Flood Earthquake and Specialty Forms...

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Chapter 6 Flood, Earthquake, and Specialty Forms Causes of loss form excludes many perils that are considered uninsurable risks What is the National Flood Insurance Program? What endorsements and options are available to policyholders who want to fill gaps in covered perils? What other specialty coverage forms are available? National Flood Insurance Program Insurers exclude flood due to high risk o Unwilling to offer low price protection for floods NFIP was created in 1968 as an alternative for disaster assistance Coverage is available through FEMA or through insurers who participate through “Write Your Own” (WYO) policies o Rates do not vary among insurers o Insurers only sell and service policies (premium collection and loss adjusting) A second objective is to encourage local land management practices to reduce future flood damage Eligibility for NFIP Special Flood Hazard Areas (SFHAs) are affected by 100-year flood Base flood elevation (BFE) is the anticipated level of 100-year flood o Used as benchmark for flood management requirements o Relationship to BFE depicted in Flood Insurance Rate Maps (FIRMs) which helps determine premiums Two NFIP Programs Emergency program is initial phase for a community o Rates are subsidized and amount of insurance is lower o Need plan for flood management and FIRMs Regular program provides higher limits of insurance NFIP General Property Form Covers most commercial buildings and business personal property against direct physical loss caused by flood o Flood is narrowly defined and excludes sewer backup Differences between NFIP General Property Form and other property coverage o ACV basis and no option for replacement cost for businesses o No coinsurance o Only specific insurance, no blanket coverage available o No coverage for loss of use (business income and extra expense) o Excludes property in basement (unless it is service equipment for building)
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Overview of NFIP General Property Form Coverage A Building o More restrictive definition of a “building” o Fixtures, machinery, and equipment must be listed Coverage B Personal Property o Household personal property or Other than household personal property, but not both o Property covered similar to homeowners or BPP Coverage C Other Coverages o Not subject to deductible o Debris removal (not subject to an internal limit) o Loss avoidance measures (up to $1,000) o $10,000 of pollution damage caused by flood Coverage D Increased Cost of Compliance (need Coverage A) o If building is “repetitive loss structure” o ICC related to flood management ordinances (up to $30,000 additional) ISO Flood Coverage Endorsement NFIP, and especially the creation of flood maps, increased flood information Especially outside SFHAs, commercial flood coverage is more available Differences between NFIP and ISO o Replacement cost coverage for businesses o Broader property coverage Building types Limits o
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