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How insurance agents can counsel clients after a flood



Filing a claim after a flood may become a hassle for policyholders and can delay claim settlement if it’s not clear what’s covered by a standard Flood insurance policy, as well as the exclusions and limitations.

What homeowners do in the first 24 hours after a storm is also crucial to a smooth and satisfactory claims process.

Aon National Flood Services Vice President of Claims Terry Black and Director of Claims Examination Duane Paulson agree that insurance agents can help their clients achieve a fast and smooth claims process by following the following simple steps.

1. Know the policy

Agents should know what’s covered under the client’s policy and what’s not, and should be able to explain the coverage thoroughly to their clients. “It is important for people to know and understand some of the major limitations or exclusions involved around basements and enclosures,” Paulson said.

Review policy for accuracy

Agents and policyholders must make sure that they have the correct information before they start the claim. Sometimes homeowners have issues that delay the claim later on, such as incorrect-named insureds on the policy or a revision of certain detail. For example, an insured who passed away, got married and added a spouse, or has a new mortgage company.

“The one we see most often is that people change mortgages a lot or their mortgages are sold from one to the other, so that’s something that can easily change for the policy holder,” Paulson said. “At claim settlement time, it’s very important that we have the correct mortgagee information or payee information.”

Know the coverages, exclusion and limitations

Agents must know the coverages, including the exclusions and limitations of the standard flood insurance policy. Paulson says some of the biggest areas for exclusions and limitations would be around basement and enclosures below elevated buildings. “There can be limited coverage in those areas, so it’s important that agents know, understand and can discuss those with policyholders, if they ask.” Both the insurance company’s adjuster and the independent adjuster are well-versed on coverages and can also answer questions. In addition, agents can reach out to the insurance company for specifics.

2. Understand flood limitations and exclusions

Flood insurance policies only cover one building. Even if there are multiple buildings on the same property, a separate policy is needed for each building. A potential exception would be the detached garage that does not have unoccupied living space used for business or farming purposes.

There are two types of Flood insurance policies, which are purchased separately. The building coverage, which has its own deductible and covers the building components, and the personal property coverage, which also has its own deductible, but covers the personal properties located inside that building, or inside another building on that property, but doesn’t cover items that are outside. Both policies are subject to exclusions.

The limitations and exclusions that apply to basements and elevated buildings can sometimes be confusing for policyholders. Coverage for the basement area is limited to a number of items stated in the policy. Homeowners should know that if they “have a house that is elevated and they have an enclosure underneath that elevated floor, there are some stipulations,” Paulson addeed.

Basements and flood debris

The coverages that apply to basements are limited mostly to building mechanical systems, and cover things such as furnaces, water heaters and circuit breakers, but will not cover the finishing. “If you have a finished basement, it won’t cover carpet or personal property items, such as couches and items stored in boxes. Knowing up front makes homeowners better prepared to deal with the losses afterwards. It will also help them in their thought path when deciding what they really want to store in the basement or how much they want to finish off the basement,” Paulson said.

Items or debris that end up on the policyholder’s property are not covered under the standard Flood insurance policy, so the insurance company will not pay to remove them completely. They will only pay to remove debris from the property to facilitate repairs. “For example, if a boat washes up against the property, the insurance company will pay to remove that debris off the building to make repairs. It doesn’t remove the boat and take it away,” Paulson said. The policy refers to debris in or under the building, “so if a piece of the building floated away, they will pay for that,” he added.

Tenants should apply for renters’ insurance as personal property in rental units are not covered under the building owner’s policy. Without that flood coverage, their contents are not covered under the standard Flood insurance policy.


3. Know the three types of policy forms

Although there is only one standard Flood insurance policy, there are three forms: The Dwelling form, which covers standard home; the General Property form, which covers commercial buildings; and the Residential Condominium Building Association Policy (RCBAP) form, which covers residential condominiums owned by an association. Base coverage is the same for all three, but they all differ slightly from each other. Cars, automobiles and airplanes are not covered under Flood insurance policy.

“Flood insurance basically covers the building structure and the contents within that building structure with some exceptions. Sometimes there are coverages for garages and places of that nature,” Black said.

Each form has some variations, Paulson said.

  • The Dwelling form covers the dwelling if the policyholder has building coverage, but there is potential for some of that coverage to be applied to a detached garage, under certain circumstances.

  • Under a General Property form, the coverage is only for the insured building. It doesn’t cover any peripheral buildings or personal property in any peripheral building.

  • The RCBAP form covers only the building insured and no other buildings or personal property in those buildings. Building coverage could potentially cover a detached garage, while personal property coverage covers personal property located in any building on that particular property, subject to exclusions and limitations.

In dealing with the Flood insurance, additional item losses aren’t really covered, Black said. The insurance company won’t address loss or damage of items not covered under the policy. Policyholders can, however, benefit from advance payments of up to 50% of the amount that they believe the claim will incur. “They will have to sign a document stating that they understand that if the claim doesn’t actually cover that amount, that money would have to be paid back,” he added, “but it allows them to have money in their hand immediately.” The initial payment is based on the estimate included in the documentation available at the time the payment is made. “That causes a lot of confusion,” Black added, “and that’s where a lot of third-party adjusters come in."

Policyholders can take the initial payment for the undisputed amounts, but there still is the opportunity for them to provide the insurance company with additional documentation as they become available. For example, “If the policyholder was filing a claim and found additional damage," Paulson said, “Let’s say they tear out the vinyl flooring and there is damage that wasn’t seen in the foundation that’s a potential for having additional coverage. Just because they have received a check or some cash doesn’t mean that they cannot pursue further claims under that policy, as long as it’s documented and covered under the policy.”

4. Get flood-related training

“Agents have to get all the training they can get on the flood to really help their policyholders,” Black said. “FEMA offers regular training seminars and continuing education” courses that agents can attend.

The Federal Emergency Management Agency (FEMA) provides links to Institutes that offer training, including agent workshops and Associate in National Flood Insurance (ANFI). The ANFI allows agents to earn a designation that reinforces the technical and practical knowledge and skills required to handle all aspects of Flood insurance coverage with confidence and accuracy.

5. Provide policyholders with the necessary resources

To ensure that their clients follow the process through and receive the best benefits from their policy, agents can also provide them with resources that will give them information on how to properly file a claim, such as the FEMA Claims Handbook. Agents should always have one in their possession so they can easily reproduce it for their policyholders. It is also in the policy and the adjuster should give one to the policyholder as well. “It’s a touch point for the agents, to allow them to provide service and answer questions for the policyholders,” Black said.

6. Reach out to clients

Paulson says it is very important for agents to reach out to policyholders after a storm, especially if they have clients living in certain areas that are affected by the flood, whom agents have not heard from.

7. Follow up

Agents should follow up regularly on the progress of their clients’ claim, and the recovery process. This will help agents retain those clients in the future. “It is just as important for an agent to be able to help the policyholder and to verify certain important information up front, such as changes in mortgages and payees,” said Paulson. “The sooner they get the ball rolling on getting those things corrected, the better, and there will be less delay for the policyholder in conclusion of the claim.”

8. Have a plan and be prepared

There’s potential for agents who live in the same area in which their policyholders are located to have their business interrupted. In the event they too are affected by the flood, agents must have a plan to be able to effectively service those policyholders. “They should basically have a catastrophe plan to deal with that,” Paulson said. "Agents should plan ahead of time how they would deal with clients if they themselves are affected by the flood."

9. Ensure proper filing of claim

Policyholders must work with the assigned adjuster, and “depending on the severity of damage and what is being claimed, they most likely will be retaining the services of a contractor who can assist them with estimates and comparing and contrasting,” Paulson added.

It is best for homeowners to meet with the adjuster before discarding anything. Store the damaged items and try to get the wet material out of the home, as soon as possible. Make a pile outside or put items in a garage or a separate area. Take photographs and document those items, just in case they are scavenged or picked up by the city. “Sometimes depending on the severity of the flood, lots of times [city workers] go through the affected areas with bulldozers to pick up the discarded items and that may take place before the adjuster has a chance to look at it,” Paulson said.

The more documentation that a policyholder has, the better. Take pictures of the documents, as well as the serial numbers and model numbers of major items, for instance, furnaces or freezers. Record everything and prepare an inventory of the items.

10. Encourage clients to:

File claims immediately

Homeowners should contact their agents and insurance company immediately after a flood to start filing their claims. “The sooner homeowners get their claim in, the better,” Paulson said. Once the company is notified, an adjuster will be dispatched to the site to begin evaluating the loss and to see damages first-hand. “This will lead to quicker resolution of the claim,” Black added.

Dry out and clean affected areas

Homeowners should start drying and cleaning out the affected areas immediately after a flood.

The first 24 hours are critical in reporting claims and the cleaning and drying out process is very important. Agents should advise their clients to store the items they plan to throw out, especially personal property. They should be kept somewhere safe or put in a pile, if possible, for the adjuster to see and document. Additionally, Paulson says “a good best practice for policyholders would be to take photographs of the damaged property as they’re moving it out or moving it into the pile, make a list and prepare an inventory of those items that they’re going to be claiming under their policy.”

Retain proof

“Most Homeowner's policies encourage owners to do a complete inventory of what they have in their house. The same thing can be done ahead of time to prepare for a flood. Knowing that inventory and having it listed some place, makes it easy to go back and look at it,” Black said.

Be cautious of what they sign

“Policyholders should consult with their agent to let them know they’re available for an adjuster to come out. After a major storm there are all kinds of organizations moving into the area and sometimes misinforming the policyholder as far as what’s paid for and what’s not,” Black said. “I would not encourage policyholders to sign contracts with anybody until they fully understand what their financial responsibilities are going to be.” Policyholders should “be careful of what they sign as far as contracts.”

The policyholder sometimes thinks that the insurance company will work with the contractor or retain someone to do the work, but all construction contracts are between the policyholder and the contractor. “The company under the Flood policy does not pay the contractor directly. All contractual agreements are between the policyholder and the contractor,” Paulson said.

Get an independent adjuster, if necessary

Homeowners sometimes hire independent adjusters, as many did after Hurricane Sandy. These adjusters basically act as representatives for the policyholders. The insurance company’s adjuster will work with the homeowner’s representative to settle the claim. The adjusters will visit the site to take photographs, take measurements, do a scope of the damages, as they see them, and prepare an estimate based on coverages and the limitations and exclusions included in the policy.

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