INTRODUCTION AND GENERAL RULES - H2O Partners · The NFIP’s Basic Agent Tutorial: ......
Transcript of INTRODUCTION AND GENERAL RULES - H2O Partners · The NFIP’s Basic Agent Tutorial: ......
1
Welcome to
The NFIP’s Basic Agent Tutorial:
Key Fundamentals of Flood Insurance
Focused on flood insurance basics for insurance professionals
1
a
INTRODUCTION AND
GENERAL RULES
Section 1
2
2
Here’s our
AGENDA
• Section 1 – Introduction and
General Rules
• Section 2 - Policy Rating,
Elevations, Premiums and More
• Section 3- Coverage, limitations
and Exclusions in the SFIP
• Section 4- Loss Settlement
Provisions
• Section 5- Flood Insurance
Resources
3
Access the NFIP Flood Insurance
Manual:
• Online at the Flood Insurance
Library: http://www.fema.gov/flood-insurance-manual
4
NFIP Flood
Insurance Manual
3
NFIP definition of “flood”
6
What is a flood?
NFIP definition of “flood”
• A general and temporary condition
of partial or complete inundation of
two or more acres of normally dry
land area or of two or more
properties (one of which is your
property) from:
a. Overflow of inland or tidal waters,
b. Unusual and rapid accumulation or
runoff of surface waters from any
source,
c. Mudflow.
7
What is a flood?
4
Mudflow
• A river of liquid and flowing mud
on the surface of normally dry
land areas as when earth is
carried by a current of water
• Not Mudflows:
• Landslide
• Slope failure
• Saturated soil mass
8
What is a flood?
Flood Related Erosion
• Collapse or subsidence of land
along the shore of a lake or
similar body of water
• Caused by waves or currents of
water exceeding cyclical levels
• Results in flooding
What is a flood?
9
5
• All Property Owners
• All Zones
Who has
flood risk?
10
SFHAs and Non-SFHAs
Special Flood Hazard Areas
(SFHAs)
• High Risk Zones
• AE (replaces A1-A30)
• A, AH, AO, A99, AR
• VE (replaces V1-V30), V, VO
Non-Special Flood Hazard Areas
(non-SFHAs)
• Low to Moderate Risk Zones
• B, C, X
• D (undetermined)
100-year floodplain = 1% annual chance flood
Over 30-year mortgage likelihood grows from 1% to at least 26% 11
6
12
Training Agenda
SFHAs appear as dark shading on a Flood Insurance Rate Map (FIRM).
Flood Insurance Rate Map (FIRM)
12
13
Digital Flood Insurance Rate Map (DFIRM)
7
14
Locating flood maps: https://msc.fema.gov/
FEMA Map Service Center
How does the NFIP Work?
How is NFIP flood
insurance purchased?
15
8
• Community Participation
• All Zones
Who can buy NFIP
flood insurance?
16
Participating Communities
17
FEMA
agrees to make flood insurance
available
COMMUNITY
agrees to adopt and enforce floodplain management regulations
9
Community Status Book Report
18
https://www.fema.gov/national-flood-insurance-program-community-status-book
Buildings may be ineligible for coverage in participating communities,
If constructed on or after identification date.
CBRS System Ability to write NFIP policies may
be restricted in some:
• Coastal Barrier Resources Act (CBRA) areas
• Otherwise Protected Areas (OPA)
• Coastal Barrier Resources Act and Coastal Barrier Improvement Act enacted:
• October 18, 1982
• November 16, 1990
19
10
• Write Your Own Company
• NFIP Direct Servicing Agent
• Licensed Property and
Casualty Agent
How is NFIP flood
insurance purchased?
20
A or V Zones
Who MUST buy flood
insurance?
21
11
Used as security for a loan
Who MUST buy flood
insurance?
22
Designated Loan
Who MUST buy flood
insurance?
23
12
Please note: Emphasis on a “building or
mobile home” as collateral
What is a
designated loan?
. A loan secured by a building or
mobile home that is located or to
be located in a “Special Flood
Hazard Area” in which flood
insurance is available under the
Act
24
Flood Insurance
vs.
Disaster Assistance
Who SHOULD buy
flood insurance?
25
13
Flood Insurance vs. Disaster Assistance
26
NFIP maximums vary by
building type and program limits
How much NFIP
flood insurance can
be purchased?
27
14
How much flood insurance coverage is available?
28
Emergency Program Regular Program
Residential (1-4 family)
Building
Contents
$35,000
$10,000
$250,000
$100,000
Other Residential
Building $100,000 $500,000
Non-Residential Business/Other Non-Residential
Building
Contents
$100,000 $100,000 $500,000
$500,000
Contents $ 10,000 $100,000
• 30-day waiting period
• Exceptions
When does an NFIP
policy become
effective?
29
15
30
For detailed information, please see the
General Rules section of the Flood Insurance Manual
When does an NFIP policy become effective?
• There is a 30 day
waiting period before
new or modified flood
insurance policies go
into effect.
• Exceptions are provided
for:
Insurance in connection with a loan transaction.
(MIRE)
Insurance purchased within 13
months of a map revision
(1-day wait).
Wildfire exception
KEY NFIP TERMS, TOOLS,
AND RULES
To use and to live by…
31
16
32
Defining Pre-FIRM and Post-FIRM
Post-FIRM
On or After the initial FIRM or After 12/31/1974 . . . whichever is LATER
Pre-FIRM
Built before initial FIRM or
On or before 12/31/1974
Full-Risk Rates vs. Subsidized Rates
33
Represent the building’s true flood risk.
Premium reflects the risk assumed by the program and all administrative expenses.
Takes into account the full range of possible flood losses.
Do not represent the building’s true flood risk.
Determined with limited underwriting information
Discounted rates that have traditionally been available for Pre-FIRM buildings in A or V zones.
Full
Ris
k R
ates
Su
bsid
ized
17
Regular vs. Emergency Program
34
• Initial participation phase
• Limited amount of coverage
• Flood Hazard Boundary Map (FHBM)
Emergency Program
• Final phase of participation
• Full limits of coverage
• Flood Insurance Rate Map (FIRM)
Regular Program
Base Flood Elevations (BFEs)
35
BFE = 1% Chance Flood
18
Preferred Risk Policy
36
Preferred Risk
Policy
Lower Cost
B,C,X, A99, AR Zones
General Property
Form
Dwelling Form
Miscellaneous NFIP Rules
37
Rules
NFIP Policy Term
• 1 year annual term
• All policies
• NFIP Direct
• Write-Your-Own
Evidence of Insurance
• Flood insurance application & premium payment
• Copy of dec page
• No binders
Community Participation
• Probation
• Suspension
19
POLICY RATING, ELEVATIONS,
PREMIUMS AND MORE…
Section 2
38
39
Case Study Facts Your client has just purchased a home in unincorporated Palm
Beach County, Florida, and he approaches you to buy a flood
insurance policy that is required by his lending institution since
the house is in flood zone AE.
About the home It is a single family dwelling with a detached
garage that will be his primary residence. The
house was built in 1995. It is a two-story house
and, like most homes in Florida, it does not have a
basement.
How much flood insurance to buy Since the house and its garage have a replacement
cost value well above the NFIP’s $250,000 single
family maximum building limit, the new
homeowner wants to buy the maximum amount of
coverage on the building along with $100,000
worth of coverage for his personal property.
Information to gather What do you need to know in order
to provide your client a quote?
Let’s take a look at the information
you would need to gather; how you
use and interpret it; and we’ll go
step-by-step to develop your
client’s quote.
Palm Beach Rating Case Study
20
40
Rating Elements
Single family dwelling with detached garage
Two-story home with no basement
Built in 1995 in Palm Beach County, FL
Flood Zone – AE
$250,000 – Building Coverage
$100,000 – Personal Property Coverage
Minimum deductibles
Palm Beach Rating Case Study
41
Step 1
Determine Pre-FIRM or Post-FIRM status
Utilize Community Status Book https://www.fema.gov/national-flood-insurance-program-community-status-book
Palm Beach Rating Case Study
22
Community Status List
44
https://www.fema.gov/national-flood-insurance-program-community-status-book
45
Step 1
Determine Pre-FIRM or Post-FIRM status
Utilize Community Status Book
Initial FIRM Date: 2/01/1979
Year Built: 1995
Post-FIRM Building
Palm Beach Rating Case Study
23
46
Step 2
Locate a FEMA Elevation Certificate
Blank Elevation Certificate Form
Palm Beach Rating Case Study
• Lowest Floor Elevation
• Elevation Difference
What is meant
by elevation?
47
24
• Elevation difference refers to the
height of a structure relative to
BFE
• A structure above BFE is less
likely to experience flood damage
• Less risk = lower premiums
48
Elevation
Difference
• Anticipated floodwater rise
• Regulatory requirement for
elevation or floodproofing
What is a Base Flood Elevation?
49
25
50
Base Flood Elevation
What is a
Base Flood Elevation?
• Base flood is a flood that
has a 1% chance of being
equaled or exceeded.
• BFE is the expected
height of that 1% chance
of flood
Lowest Floor Elevation
51
BASEMENT
26
53
Elevation
Certificates (EC)
• An EC includes important
information for determining a risk-
based premium
• EC shows:
• Location of the building
• Lowest floor elevation
• Building characteristics
• Flood zones
• Base flood elevation
• See building diagrams in the NFIP
Flood Insurance Manual or the EC
instructions
Why are Elevation
Certificates used?
54
• An Elevation Certificate:
• Certifies building elevation
• Documents community
compliance
• Determines policy rates
• Supports map revisions and
amendments
How are Elevation
Certificates used?
27
• A surveyor, engineer, or architect
must certify the building elevation
• Insurance agents use this
information for rating
55
Who Completes
an Elevation
Certificate?
• Where to locate an Elevation
Certificate for a building:
• Ask the local floodplain manager
• Ask the sellers
• Ask developer/builder
• Check the property deed
• Hire a licensed land surveyor,
professional engineer or certified
architect
56
Where to find an
Elevation
Certificate?
28
Use of Elevation Certificates
FEMA Elevation Certificates
57
Pre-FIRM Construction (SFHAs)
Not Required: Pre-FIRM subsidized rating Required: Full-risk rating approach
.
Non-SFHA zones (B, C, D, and X)
Elevation certificates not required
Post-FIRM Construction (SFHAs)
Elevation certificates are required
FEMA Elevation Certificate
58
EC Sections – A thru F
29
FEMA Elevation Certificate
59
EC Sections
Section A Section B Section C Section D Sections E,F
FEMA Elevation Certificate
60
EC Sections
Section A
30
FEMA Elevation Certificate
61
EC Sections
Section B
FEMA Elevation Certificate
62
EC Sections
Section C
31
FEMA Elevation Certificate
63
EC Sections
Section D
FEMA Elevation Certificate
64
EC Sections
Sections E & F
33
FEMA Elevation Certificate
67
Building Diagram 1A
Elevation Certificates:
Who Needs Them and Why Click here for on-line version
How an EC is used
Who needs an EC
Where to get an EC
When you need an EC
When you do not need an EC
Useful terms
Resources
EC Fact Sheet
68
34
69
Step 3
Utilize FEMA Elevation Certificate
Determine Elevation Difference
Palm Beach Rating Case Study
FEMA Elevation Certificate
70
EC Sections
Palm Beach County* - 120192 Palm Beach County FL
AE 13.0
Single family dwelling | 2-story home - no basement | Built in 1995 in Palm Beach County, FL Post-FIRM construction | Flood Zone – AE | Diagram 1A – slab on grade
70
35
13.0
FEMA Elevation Certificate
71
EC Sections
Palm Beach County* - 120192 Palm Beach County FL
AE 13.0
Single family dwelling | 2-story home - no basement | Built in 1995 in Palm Beach County, FL Post-FIRM construction | Flood Zone – AE | Diagram 1A – slab on grade
71
14.1
72
Step 3
Utilize FEMA Elevation Certificate
Determine Elevation Difference Palm Beach County Case Study
Elevation Difference: +1
Lowest Flood Elevation: 14.1
Base Flood Elevation: 13.0
Elevation Difference: +1.1
Rounds down: +1.0
Palm Beach Rating Case Study
36
73
Step 4
Determine Rating Approach
Subsidized rating vs. Full-risk rates
Palm Beach Rating Case Study
Reform Legislation Impact
74
25%
Annual Increases *Limits increases to
18%
• Individual premium increases
• Includes Reserve Fund Assessment
• Does not include:
• HFIAA surcharge
• Federal Policy Fee
Limits increases to 18%
• Subsidized rates for:
• Non-primary residences
• Business properties
• Severe repetitive loss
• Substantially Damaged Substantially Improved
25% Annual Increases
37
Impact of Biggert-Waters Reform Act
75
How are premiums changing?
As of January 1, 2013
• Non-primary residences*
• Subsidized rates increase 25% per year upon
renewal
• Until they reach full risk-rate
Subsidized 25% 25% 25%? 25%?
Full Risk
Rates
*A non-primary residence is a single family dwelling, condominium unit, apartment unit,
or unit within a cooperative building that will not be lived in by the policyholder or the
policyholder’s spouse for more than 50% of the 365 days following the current policy
effective date. A policyholder and the policyholder’s spouse can have more than one
primary residence provided they submit the required supporting documentation for each
residence. (See Flood Manual for complete details)
Impact of Biggert-Waters Reform Act
76
How are premiums changing?
Effective April 1, 2016
• Subsidized rates increase for:
• Business properties (non-residential)*
• Subsidized rates increase 25% per year upon renewal until they reach full risk-rate
Subsidized 25% 25% 25%? 25%?
Full Risk
Rates
*A non-residential business is a building in which the named insured is a commercial enterprise
primarily carried out to generate income and the coverage is for:
• A building designed as a non-habitational building
• A mixed use building in which the total floor area devoted to residential uses is:
• 50% or less for single family or 75% or less for all other residential properties
• A building designed for use as office or retail space, wholesale space, hospitality space
or for similar uses
38
Subsidized Rates
$4,795/yr
$4,795/yr
$4,795/yr
$618/yr
$11,785/yr
$4,531/yr
Full-Risk Rates
Pre-FIRM Post-FIRM
77
4 ft below BFE
1 ft below BFE
4 ft above BFE
*AE Zone (04/01/18 rates) Bldg- $250,000 Contents- $100,000; Primary Residence, Single-story with no basement, crawlspace or enclosure rates; Zone AE; $2K deductible Bldg./Contents
77
“Let me get back to you with a quote!”
Palm Beach County
Rating Case Study
• Single family dwelling with
detached garage
• 2-story home - no basement
• Built in 1995 in Palm Beach
County, FLT
• Post-FIRM construction
• Flood Zone – AE
• +1 Elevation Difference
• $250,000 – Building
• $100,000 – Personal Property
• Minimum deductibles
78
39
79
Step 5
Review Key Rating Components
Basic & Additional Limits
Increased Cost of Compliance
Community Rating System
Reserve Fund Assessment
Premium Surcharge
Federal Policy Fee
Palm Beach Rating Case Study
How much flood insurance coverage is available?
80
Emergency Program Regular Program
Residential (1-4 family)
Building
Contents
$35,000
$10,000
$250,000
$100,000
Other Residential
Building $100,000 $500,000
Non-Residential Business/Other Non-Residential
Building
Contents
$100,000 $100,000 $500,000
$500,000
Contents $ 10,000 $100,000
40
Additional Limit Basic Limit
Building Coverage
Single family
2—4 family
$ 60,000
$ 60,000
Other residential
Non-res. Bus./Other Non-res.
$ 175,000
$ 175,000
$ 190,000
$ 190,000
$ 325,000
$ 325,000
Contents Coverage
Single family
2—4 fam; other res.
$ 25,000
$ 25,000
Non-res. Bus./Other Non-res. $ 150,000
$ 75,000
$ 75,000
$ 350,000
Rating: Basic and Additional Limits
81
82
Training Agenda
Palm Beach County
Rating Case Study
“Let me get back to you with a quote!”
• Single family dwelling
• 2-story home - no basement
• Built in 1995 in Palm Beach County
• Post-FIRM construction
• Flood Zone – AE
• +1 Elevation Difference
• $250,000 – Building
• $100,000 – Personal Property
• Minimum deductibles
82
.71/.08
41
83
Training Agenda
Palm Beach County
Rating Case Study
“Let me get back to you with a quote!”
.38/.12
83
• Single family dwelling
• 2-story home - no basement
• Built in 1995 in Palm Beach County
• Post-FIRM construction
• Flood Zone – AE
• +1 Elevation Difference
• $250,000 – Building
• $100,000 – Personal Property
• Minimum deductibles
84
Training Agenda
Palm Beach County
Rating Case Study
“Let me get back to you with a quote!”
• Building Coverage:*
• Basic: 60,000 X .71 = $426.00
• Add’l: 190,000 X .08 = $152.00
• Personal Property Coverage:*
• Basic: 25,000 X .38 = $95.00
• Add’l: 75,000 X .12 = $90.00
• Less 2% Deductible Discount
• Annual Subtotal: $748.00
* Rates per $100 of coverage limit (4/1/18 rates)
84
• Single family dwelling
• 2-story home - no basement
• Built in 1995 in Palm Beach County
• Post-FIRM construction
• Flood Zone – AE
• +1 Elevation Difference
• $250,000 – Building
• $100,000 – Personal Property
• Minimum deductibles
42
85
Training Agenda
Palm Beach County
Rating Case Study
“Let me get back to you with a quote!”
• Annual Subtotal: $748.00
• Increased Cost of Compliance: $5.00
• Subtotal: $753.00
85
• Single family dwelling
• 2-story home - no basement
• Built in 1995 in Palm Beach County
• Post-FIRM construction
• Flood Zone – AE
• +1 Elevation Difference
• $250,000 – Building
• $100,000 – Personal Property
• Minimum deductibles
Community Rating System (CRS)
• Encourages communities to exceed minimum NFIP requirements
• > 1,300 communities participate in CRS
• CRS classes 1 –10:
• Class 1 = 45% premium discount
• Class 9 = 5% discount
• 10: No discount
Community Rating System: https://www.fema.gov/community-rating-system Class 1
Roseville, CA
Class 2 Tulsa, OK
Sacramento County, CA Fort Collins, CO
King County, WA Pierce County, WA
Thurston County, WA 86
43
87
Training Agenda
Palm Beach County
Rating Case Study
“Let me get back to you with a quote!”
87
• Single family dwelling
• 2-story home - no basement
• Built in 1995 in Palm Beach County, FL
• Post-FIRM construction
• Flood Zone – AE
• +1 Elevation Difference
• $250,000 – Building
• $100,000 – Personal Property
• Minimum deductibles
88
Training Agenda
Palm Beach County
Rating Case Study
“Let me get back to you with a quote!”
• Annual Subtotal: $748.00
• Increased Cost of Compliance: $5.00
• Subtotal: $753.00
• $753.00 X .75 = $564.75 or $565.00
88
• Single family dwelling
• 2-story home - no basement
• Built in 1995 in Palm Beach County, FL
• Post-FIRM construction
• Flood Zone – AE
• +1 Elevation Difference
• $250,000 – Building
• $100,000 – Personal Property
• Minimum deductibles
44
Reserve Fund Assessment
• Builds reserves to fund future claims
activity
• 15% Assessment
• Preferred Risk Policy
• Newly Mapped
• All other policies
• Applied after ICC and CRS discount
• No agent commission paid on
reserve fund
Introduced October 1, 2013
15%
89
90
Training Agenda
Palm Beach County
Rating Case Study
“Let me get back to you with a quote!”
• Annual Subtotal: $748.00
• Increased Cost of Compliance: $5.00
• CRS discount – 25%
• Subtotal: $565.00
• $565.00 X 1.15 = $649.75 or $650.00
90
• Single family dwelling
• 2-story home - no basement
• Built in 1995 in Palm Beach County, FL
• Post-FIRM construction
• Flood Zone – AE
• +1 Elevation Difference
• $250,000 – Building
• $100,000 – Personal Property
• Minimum deductibles
45
HFIAA* Premium Surcharge
• Applies to all new and renewed
policies annually
• $25 for primary residences
• $250 for all other policies
• Applies to contents-only policies
• Surcharge is a fully earned** flat fee
based on building occupancy
• Not subject to earned commissions
**See Cancellation and Endorsement sections
of the NFIP Flood Insurance Manual for exceptions 91
* HFIAA – Homeowner Flood Insurance Affordability Act
92
Training Agenda
Palm Beach County
Rating Case Study
“Let me get back to you with a quote!”
• Annual Subtotal: $748.00
• Increased Cost of Compliance: $5.00
• CRS discount – 25%
• Reserve Fund Assessment – 15%
• Subtotal: $650.00
• HFIAA Surcharge: $25.00
• Subtotal: $675.00
92
• Single family dwelling
• 2-story home - no basement
• Built in 1995 in Palm Beach County, FL
• Post-FIRM construction
• Flood Zone – AE
• +1 Elevation Difference
• $250,000 – Building
• $100,000 – Personal Property
• Minimum deductibles
46
Federal Policy Fees
Federal Policy Fee Rate Type
Standard Rated Policies/ Newly Mapped Properties
$50
Preferred Risk Policies/ Tenants’ contents only policies (ex. RCBAP/GFIP)
$25
1 unit - 2-4 units - 5-10 units - 11-20 units - 21 or more -
$ 50.00 per policy $ 150.00 per policy $ 400.00 per policy $ 800.00 per policy
$2.000.00 per policy • Charged for all new and renewal policies • Fully earned on effective date of policy (except as indicated in Cancellation section of the NFIP
Flood Insurance Manual) • Not subject to earned commissions
93
RCBAP
94
Training Agenda
Palm Beach County
Rating Case Study
“Let me get back to you with a quote!”
• Annual Subtotal: $748.00
• Increased Cost of Compliance: $5.00
• CRS discount – 25%
• Reserve Fund Assessment – 15%
• HFIAA Surcharge: $25.00
• Subtotal: $675.00
• Federal Policy Fee: $50.00
• Total Amount Due: $725.00
Total w/o CRS
discount = $941.00
94
• Single family dwelling
• 2-story home - no basement
• Built in 1995 in Palm Beach County, FL
• Post-FIRM construction
• Flood Zone – AE
• +1 Elevation Difference
• $250,000 – Building
• $100,000 – Personal Property
• Minimum deductibles
47
95
Step 6
Other Rating Considerations
Newly Mapped procedure
Grandfather rules
Elevated buildings
Building enclosures
Proper flood openings
Breakaway walls
Palm Beach Rating Case Study
Newly Mapped Procedure
• Effective April 2015
• Newly Mapped procedure
• Properties in B, C, X, D, AR
and A99 zones on the old
map to an SFHA on new
map
• Must meet specific loss
eligibility requirements
96
48
Newly Mapped procedure
Newly Mapped procedure applies to:
• Properties newly mapped into an
SFHA from B, C, X, D, AR and
A99 zones
• Policies previously issued under
the PRP Eligibility Extension
• Properties newly mapped into
SFHA may be eligible to receive
a “preferred risk premium” for the
first year after map revision*
Effective April 1, 2015
*Preferred Risk Policy premium before: • Reserve Fund Assessment • Federal Policy Fee • After first year, policies begin transition to full-risk
rates
97
Newly Mapped procedure
Newly Mapped into SFHA on or after
April 1, 2015
• Eligible for Newly Mapped
procedure:
• If coverage effective within 12
months of map revision
• Not eligible for Newly Mapped
procedure:
• If coverage not effective within 12
months of map change
• Post-FIRM buildings may qualify
for built-in-compliance
grandfathering
• Pre-FIRM buildings may qualify
for Pre-FIRM subsidized rates
NOTE: All Properties must meet Preferred Risk Policy loss
requirements to be eligible for Newly Mapped Procedure
Within 12 months of map revision
98
Quick Key: Buildings in Palm Beach County affected by the map change effective 10/5/17 have until 10/4/18 to take advantage of the Newly Mapped procedure.
49
Grandfather Rules
Allows a property owner to:
• “Lock” in a previous flood
zone
• “Lock” in a previous Base
Flood Elevation
• For rating purposes
Continuous Coverage vs. Built-in Compliance
99
If policy was obtained prior to the
effective date of the map change:
• Rates can be based on prior
zone/BFE
• Continuous coverage must be
maintained
100
Grandfather Rules
Continuous Coverage
50
If building was built in compliance
with FIRM in effect at time of
construction:
• Use old map’s zone or BFE, or
• Use current rating criteria
• Submit proof to carrier
• Continuous coverage not required
101
Grandfather Rules
Built in Compliance
102
Grandfather Rules
Historic flood maps
Find “historic” flood maps by clicking on:
“Search All Products”
51
103
Elevated Buildings Elevated building defined
Elevated buildings:
• Do not have basements
• Lowest elevated floor raised above
ground level by:
• Foundation walls
• Shear walls
• Posts
• Piers
• Pilings
• Columns
Note: In Zones V and VE, solid foundation perimeter walls are unacceptable for
elevated buildings.
104
Elevated Buildings
Building enclosures
An enclosure is:
• Portion of an elevated building below
the lowest elevated floor
• Partially or fully shut in by rigid walls
Finished Enclosure: • Drywall is mudded, taped and painted • Painted plywood
Unfinished Enclosure: • Drywall only painted • Drywall is mudded and taped but not painted • Block walls even if painted
52
105
Elevated Buildings
Proper Openings
Proper opening requirements:
• Must automatically equalize flood
forces by allowing entry and exit of
floodwaters
• A minimum of 2 openings on at least
2 exterior walls
• Total net area of not less than 1
square inch for every square foot of
enclosure
• Bottoms of openings no higher than 1
foot above the higher of the exterior
or interior grade
Can only be used for: • Building Access • Parking • Storage
106
Elevated Buildings
Breakaway Walls
Breakaway walls are:
• Not part of structural support
• Intended to collapse under certain
lateral loading forces
• Without causing damage the
elevated portion of the building or
the supporting foundation system
V Zones – Coastal Areas
• Should be less than 300 square feet • Unfinished • Used for access, parking or storage only • No machinery or equipment
53
COVERAGE, LIMITATIONS AND
EXCLUSIONS IN THE SFIP
Section 3
108
109
Case Study Facts Six months later – Flash floods strike Palm Beach County.
Torrential rains flood the house’s first floor with about 2 feet of
water.
Damage to the first floor consists of:
Severe warping of the home’s hardwood
flooring
Carpeting in the bedrooms soaked and
muddied by flood waters
Drywall and the insulation behind it damaged
Appliances and mechanicals damaged and
inoperative
Furniture, clothing and other personal articles,
including the homeowner’s valuable baseball
card collection severely impacted
Other Damage: House has a detached garage
inundated by flood waters,
destroying all the personal
property items in it as well as
flooding the family’s second car
parked in the garage
Palm Beach Case Study
54
Standard Flood Insurance Policy (SFIP) NFIP coverage forms
110
Provides building and/or personal
property coverage for:
• Non-condominium 1-to-4 family
dwellings
• Dwelling unit in a residential
condominium building
• Residential townhouse/rowhouse
• Mobile Homes/Travel Trailers as
dwellings
111
Dwelling Form
Quick Key: Palm Beach Case Study house uses Dwelling Form – watch for coverage specifics.
55
Provides building and/or personal
property coverage for:
• Non-condominium Residential
Buildings with 5 or more units
• Apartment building
• Co-operative building
• Dormitory
• Assisted living facility
• Non-residential Buildings
• Office building
• School, Church
• Factory, Warehouse
• Agricultural building
• Restaurant, etc.
112
General
Property Form
Provides building and, if purchased,
contents coverage (commonly owned):
• Condominium buildings with 75%
or more of total floor area for
residential use
• Issued to a residential
condominium association
• On behalf of association and unit
owners
113
Residential
Condominium Building
Association Policy
56
Preferred Risk Policy (PRP)
• Lower-cost Standard Flood
Insurance Policy (SFIP)
• Uses Dwelling or General
Property Forms
• RCBAP not eligible
• Buildings in B, C, X, A99
and AR zones
• In regular program
communities
• Must meet eligibility
requirements
• Not Eligible for PRP, if:
• Any of following exist:** • 2 flood claim payments for separate
losses, each > $1,000
• 3 or more flood claim payments for
separate losses, regardless of $
• 2 Federal flood disaster relief
payments for separate occurrences,
each > $1,000
• 3 Federal flood disaster relief
payments for separate occurrences,
regardless of amount
• 1 flood claim payment and 1 Federal
disaster relief payment, each for
separate losses and each > $1,000
**During any 10-year period, regardless of change of ownership of the building
Description & Eligibility Requirements
114
115
Types of
Coverage
Standard Flood Insurance
Policy (SFIP):
• Coverage A:
• Building Property
• Coverage B:
• Personal Property
• Coverage C:
• Other Coverages
• Coverage D:
• Increased Cost of Compliance
SFIP is a single peril property policy. Will pay for “direct physical loss by or from flood.”
57
• Walled and roofed
• Affixed to a permanent site
• Principally above ground
level
What is a
Building?
116
Coverage A – Building Property
• Must have 2 or more outside rigid
walls
• A fully secured roof
• Affixed to a permanent site
• Must resist flotation, collapse or
lateral movement
• At least 51% of ACV above ground
level
What is a
Building?
117
58
• Eligible buildings include:
• Manufactured (Mobile Homes)
• Travel Trailers
• Must be affixed to a permanent
foundation
• No weight supported by wheels or
axles
• Anchored in SFHAs to resist flotation,
collapse or lateral movement
What is a
Building?
118
Coverage A: Building Property Manufactured/Mobile Homes & Travel Trailers
• Allows issuance of SFIP before
building is walled and roofed
• Offers coverage while work is in
progress except when:
• Construction halted for > 90 days
• Lowest floor for rating is below BFE
• Building deductible is doubled until
walled and roofed
What is a
Building?
119
Covers materials and supplies while contained in an enclosed building on premises or adjacent to the premises
Coverage A: Building Property Buildings in the Course of Construction
59
Additions and Extensions
NFIP insures additions and
extensions attached to and in
contact with the building, by
means of a:
• Rigid exterior wall
• Solid load-bearing interior wall
• Stairway
• Elevated walkway
• Roof
Coverage A: Building Property
120
NOTE: At the insured’s option, additions and extensions connected by any of these methods may be separately insured.
• At policyholder’s option:
• 10% of building coverage can be
applied to a detached garage
• Applies to Dwelling Form only
• Not additional coverage
• Reduces building limit of liability
What is a
Building?
NOTE: Option does not apply to any detached garage used or held for use for residential, business, or farming purposes.
121
Coverage A: Building Property Detached Garages
60
Coverage A: Building Property
• Awnings, canopies
• Blinds
• Built-in dishwashers
• Built-in microwave ovens
• Carpet permanently installed over unfinished flooring
• Central air conditioners
• Elevator equipment
• Fire sprinkler systems
• Walk-in freezers
• Furnaces and radiators
• Garbage disposal units
• Light fixtures
• Hot water heaters, including solar water heaters
• Outdoor antennas & aerials fastened to buildings
• Permanently installed cupboards, bookcases, cabinets, paneling and wallpaper
• Plumbing fixtures
• Pumps and machinery for operating pumps
• Ranges, cooking stoves and ovens
• Refrigerators
• Wall mirrors (permanently installed.)
122
Coverage B – Personal Property
Dwelling Form:
• If personal property coverage is
purchased, the SFIP insures:
• Personal property inside a building
• At the described location
General Property/RCBAP:
• If personal property coverage is
purchased, the SFIP insures:
• Personal property inside
• Fully enclosed insured building
Dwelling Form
vs. GPP/RCBAP
Quick Key: Palm Beach Case Study house has damage to personal property in detached garage. Detached garage is a building at the described location.
123
61
Coverage B: Personal Property
Dwelling Form
• Air conditioning units, portable or window type
• Carpets, not permanently installed, over unfinished flooring
• Carpets over finished flooring
• Clothes washers and dryers
• “Cook-out” grills
• Freezers, other than walk-in, and food in any freezer
• Portable microwave ovens and portable dishwashers
General Property/RCBAP
• Air conditioning units
• Carpet, not permanently installed, over unfinished flooring
• Carpets over finished flooring
• Clothes washers and dryers
• “Cook-out” grills
• Freezers, other than walk-in, and food in any freezer
• Outdoor equipment and furniture stored inside the insured building
• Ovens and the like
• Portable microwave ovens and portable dishwashers
124
Quick Key: Case Study house has carpet damage. Is it Coverage A or B? Luckily insured has purchased both coverages.
Coverage B: Personal Property General Property Form
125
If Household Personal Property: If Other than Household:
Typical household personal property Furniture and fixtures
Belonging to the insured or to a member of the insured’s household
Machinery and equipment
Insured’s option: property belonging to a guest or domestic worker
Stock
Insured may be legally liable for Other personal property owned by insured and use in insured business
Under the General Property Form, coverage will be either for household personal property or other than household personal property, while within the insured building, but not both.
62
126
Case Study Facts
Just to continue the discussion from a flood loss and
coverage standpoint – what if this house had a basement?
Let’s say that portions of the basement are finished with
an office and a rec room area included.
Items damaged in basement: Desk and chair
Computer and printer
Television and stereo
Pool table
Carpeting
Wall paneling
All major mechanicals
Appliances, including a refrigerator
Electrical outlets
Sump pump
Other personal items
What’s Covered/What’s Not?
Palm Beach
What if…? Case Study
Coverage A & B – Basements
Basement is defined as:
• Any area of the building, including any
sunken room or sunken portion of a
room, having its floor below ground
level (subgrade) on all sides.
What is a
Basement?
127
63
128
• Central air conditioners
• Cisterns & the water in them
• Unfinished drywall (walls, ceilings)
in a basement
• Electrical junction and circuit
breaker boxes
• Electrical outlets and switches
• Elevators and related equipment
• Fuel tanks and fuel in them
• Furnaces and hot water heaters
• Heat pumps
• Non-flammable insulation in a
basement
• Pumps and tanks used in solar
energy systems
• Stairways and staircases (attached
to building)
• Sump pumps
• Water softeners and chemicals in
them, water filters and faucets
installed as integral part of
plumbing system
• Well water tanks and pumps
• Required utility connections for
items on this list
• Footings, foundations, posts, etc.,
required to support building
• Clean-up
*Applies to basements in ANY zone and Post-FIRM enclosures in SFHAs listed. Please see the policy for complete details.
Coverage A: Basement/Enclosures
Covered Building Property in Basements/Enclosures*
129
If policyholder has purchased
personal property coverage:
• Portable or window air conditioning units
• Clothes washers and dryers
• Food freezers (other than walk-in) and food in any freezer
Coverage B: Basement/Enclosures
Covered Personal Property in Basements/Enclosures
If installed in their functioning locations and, if necessary for operation, connected to a power source.
64
What’s Covered in a Basement*?
• Furnace
• Refrigerator
• Desk
• Television
• Washer
• Stereo
• Sump pump
• Computer
• Desk Chair
• Printer
• Carpeting
• Dryer
• Wall paneling
• Pool table
• Electrical outlets
• Food in refrigerator
• Water softener
130 * Also in building enclosure below the lowest elevated floor of a Post-FIRM building in SFHAs listed in SFIP
Coverage C – Other Coverages
The SFIP pays the expense to remove:
• Non-owned debris on or in insured
property
• Debris of insured property anywhere
• Value of labor based on Federal
minimum wage
• NOTE: This coverage does not
increase the Coverage A or
Coverage B limit of liability.
Debris Removal
131
65
Coverage C – Other Coverages
The SFIP pays the expense for:
• Loss avoidance measures:
• Sandbags, supplies, labor (up to
$1,000)
• Property removed to safety (up to
$1,000)
• Value of labor based on Federal
minimum wage
• NOTE: This coverage does not increase
the Coverage A or Coverage B limit of
liability.
Loss Avoidance
Measures
No deductible applies to either Loss Avoidance measure
132
Coverage C – Other Coverages
The SFIP pays the expense for:
• Condominium loss assessments
(Dwelling Form):
• Assessed to policyholder by condo
association
• Up to the Coverage A limit of liability
• NOTE: This coverage does not increase
the Coverage A or Coverage B limit of
liability.
Condo Loss
Assessments
133
66
Coverage C – Other Coverages
The SFIP pays the expense for:
• Pollution Damage
(General Property Form):
• $10,000 maximum limit
• Does not include testing or
monitoring unless required by law or
ordinance
• NOTE: This coverage does not increase
the Coverage A or Coverage B limit of
liability.
Pollution
Damage
134
135
• Coverage A - $250,000
• Coverage B - $100,000
• Debris Removal Expense:
• $15,000
• Reduces Coverage A or B
limit
• For example:
• Coverage A - $235,000
Coverage C: Other Coverages Coverage C: Does not increase Coverage A or B
67
136
SFIP pays for complying with state or local floodplain management law or ordinance
• Compliance activities include: • Elevation, Relocation,
Demolition, Floodproofing
• Eligibility requires: • Substantial damage
• 50% of market value, or • Lower local standard
• Repetitive loss • 2 flood losses in 10 years • 25% of market value
Coverage D: Increased Cost of Compliance
Coverage D: Compliance & Eligibility
ICC Limit of Liability
$30,000
See Part III. Property Covered - Section D of SFIP for complete details
on eligibility and coverage
137
• Personal property not inside a
building
• Building, and contents in it, located
entirely in, on, or over water
• Open structures, including a
boathouse in, on, or over water
• Recreational vehicles
• Self-propelled vehicles or machines
licensed for public road use
• Land, land values, lawns, trees,
shrubs, plants, growing crops or
animals
• Accounts, bills, coins, currency,
other valuable papers
• Walks, decks, driveways, etc.
• Underground structures and
equipment, including wells, septic
tanks, septic systems
• Containers & related equipment, such
as tanks containing gases and liquid
• Buildings and their contents if > 49%
of ACV is below ground
• Fences, retaining walls, seawalls,
piers, docks, etc.
• Aircraft, watercraft or their
furnishings and equipment
• Hot tubs and spas that are not
bathroom fixtures
• Swimming pools and their equipment
Property Not Covered
Examples of Property Not Covered
See Standard Flood Insurance Policy coverage forms for more information
Quick Key: Case Study house had the family’s second car damaged by flood. Vehicles licensed for public road use are not
covered.
68
138
Exclusions Exclusions Partial list of SFIP Exclusions
The SFIP does not provide coverage for:
• Loss of revenue or profits
• Loss of access
• Loss of use
• Loss from interruption of business or
production
• Additional living expenses
139
Exclusions Exclusions Partial list of SFIP Exclusions
SFIP does not pay for losses for:
• Water or water borne material that:
• Backs up thru sewers or drains
• Discharges or overflows from a sump
pump
• Seeps or leaks on or thru covered
property
• Damage from the pressure or weight
of water
Exception:
Unless there is a flood in the area and the flood is the proximate cause of
one of the excluded items.
69
140
Summary of
Coverage
Flood Insurance Reform Act of 2004
Summary of Coverage
Information sent to policyholder by
WYO Company or NFIP Servicing
Agent:
• Summary of Coverage form
• Cover letter for enclosures
• Copy of flood insurance policy
141
Claims
Handbook
Flood Insurance Reform Act of 2004
Claims Handbook
FEMA sends to policyholder:
• Property’s loss history information
• Claims handbook
• Acknowledgment form to sign
• Cover letter referencing
enclosures
70
LOSS SETTLEMENT
PROVISIONS
Section 4
142
Loss Settlement -Deductibles
• Minimum deductibles vary based
on:
• Policy rating
• Amount of coverage
NOTE: Deductible doubles for building under
construction prior to being walled and roofed 143
71
Loss Settlement Deductibles
144
Loss Settlement -Deductibles
• Minimum deductibles vary based
on:
• Policy rating
• Amount of coverage
• Optional deductibles are available
NOTE: Deductible doubles for building under
construction prior to being walled and roofed 145
Non-residential - $50,000 RCBAP - $25,000 Residential - $10,000
72
Loss Settlement -Deductibles
• Minimum deductibles vary based
on:
• Policy rating
• Amount of coverage
• Optional deductibles are available
• Separate for building and for
contents
• No deductible for:
• Loss avoidance measures
• Loss assessments
• ICC
NOTE: Deductible doubles for building under
construction prior to being walled and roofed
Non-residential - $50,000 RCBAP - $25,000 Residential - $10,000
146
147
Loss Settlement
Approaches
Loss Settlement Provisions Loss Settlement and the SFIP
• Replacement Cost Value
• Actual Cash Value
• Special Loss Settlement
73
148
Loss Settlement
Approaches
Loss Settlement Provisions Replacement Cost under Dwelling Form
Replacement Cost Loss Settlement applies
to:
• Single Family Dwelling
• Building only
• Contents (ACV)
• Must be principal residence
• Insured-to-Value:
• 80% of replacement cost at time of loss, or
• Maximum under NFIP
Quick Key: Principal Residence: the
insured or insured’s spouse
must have lived there for at
least 80% of 365 days
immediately before the loss.
149
Loss Settlement
Approaches
Loss Settlement Provisions Replacement Cost under RCBAP
• Insures a residential condominium
building owned by a condominium
association.
• Replacement cost loss settlement
applies to condos other than
manufactured homes/travel trailers
• If insured to at least 80% of its
replacement cost value at the time of
loss or max limit there is no
coinsurance penalty
74
RCBAP Maximum Amount of Insurance
• The maximum RCBAP building coverage
• Equals the replacement cost value of the
building, or
• $250,000 per unit times the number of
units, whichever is less
RCBAP
Maximum
$250,000 x 10 Units = $2,500,000
$250,000 x 100 Units = $25,000,000
150
151
Loss Settlement
Approaches
Loss Settlement Provisions Replacement Cost under RCBAP
• Insures a residential condominium
building owned by a condominium
association.
• Replacement cost loss settlement
applies to condos other than
manufactured homes/travel trailers
• If insured to at least 80% of its
replacement cost value at the time of
loss or max limit there is no
coinsurance penalty
75
RCBAP Co-Insurance Penalty Applies to Building Coverage Limit
Amount of insurance at time of loss
Amount of insurance required
X
Amount of loss (before deductible)
= Limit of Recovery
152
153
Loss Settlement
Approaches
Loss Settlement Provisions Actual Cash Value
Actual Cash Value loss settlement
applies to:
• 2-to 4 family dwellings
• Single family that are not eligible for
RCV
• Other Residential buildings
• Non-residential buildings
• Detached garages
• Personal property
• Mobile homes under 16 ft. wide and
under 600 sq. ft 52-unit Apartment Building
76
154
Loss Settlement
Approaches
Loss Settlement Provisions Manufactured/Mobile Homes and
Travel Trailers
Special Loss Settlement applies to:
• Mobile homes/travel trailers
• At least 16’ wide; at least 600 square feet
• Must be principal residence
• Partial losses settled according to
replacement cost loss settlement
conditions
• If it is total loss, coverage is the least of:
• The building’s limit of liability
• Replacement cost of dwelling
• 1.5 times ACV
FLOOD INSURANCE
RESOURCES
Section 5
155
77
Access the NFIP Flood Insurance
Manual:
• Online at the Flood Insurance
Library: http://www.fema.gov/flood-insurance-manual
NFIP Flood
Insurance Manual
156
www.fema.gov/national-flood-insurance-program
National Flood Insurance Program Home Page
157
78
www.floodsmart.gov
FloodSmart.gov
158
Key Fundamentals Course Page
159
Handouts at: www.h2opartnersusa.com/agent/floodtraining.html
79
Locating flood maps: https://msc.fema.gov
FEMA Map Service Center
160
https://www.fema.gov/national-flood-insurance-program-flood-insurance-advocate
Office of the Flood Insurance Advocate
161
80
• All attendees will be receiving an
email with a link to a survey and
feedback form.
• Please take time to complete and
help us improve our training effort!
Evaluations
162
• Melanie Graham [email protected]
• Mike Moye
• Rich Slevin
• Rich Waalkes [email protected]
• Aaron Montanez/Will Lucas [email protected]
Contact Info
163