Frequently Asked Questions (FAQ’s) About Insurance

Q: How much liability insurance do I need?

A: Liability policies provide coverage for defense and settlement costs. Defense coverage is unlimited in most cases. There are a variety of discretionary limits available. Consider purchasing sufficient coverage to allow you to maintain your assets.

Q: How do I protect my company against identity fraud?

A: One important way to protect yourself is to learn how hackers invade data bases. There are many risk management tools available to assist companies, including firewalls and secure websites. Specialty insurance lines have developed Cyber Liability policies to protect businesses in the event protected information is invaded and made public.

Q: What can I do to control my workers’ compensation costs?

A: Claims drive workers’ compensation costs. The best way to control claims costs is to identify how and why claims occur. A loss analysis can pin point the type of accident, location, time of day, occupation, etc. Once the causes are known, you can implement an employee safety program.

Q: How much business property insurance do I need?

A: Business property insurance protects your building and the property within it, including computers, furniture, fixtures, and personal property used to conduct normal business operations. You can purchase coverage sufficient to replace your property.

Q: Must I have workers’ compensation insurance?

A: All states require workers’ compensation coverage for businesses that have employees. State laws regarding workers’ compensation insurance vary, so talk to your insurance agent to learn about your responsibilities.

Q: What is business income coverage?

A: Business income insurance covers the loss of profits and continuing operating expenses. The purpose is to make you whole in the event of a covered loss.

Q: I’m afraid an employee might sue me. Is there insurance for this?

A: This type of insurance is called employment practices liability insurance. This type of business insurance protects employers when there are claims such as discrimination, harassment or wrongful termination. This type of business insurance policy is usually one you must purchase as a stand-alone policy or as part of a directors and officers liability policy.

Q: Is terrorism coverage necessary?

A: State laws, lending institutions or other parties to a contract may require you to purchase terrorism insurance. Businesses that are potential terrorism targets should also consider this coverage.

Q: How do I protect all the information stored on company computers?

A: Cyber coverage protects your stored information in the event it is compromised or destroyed. Cyber liability coverage protects you in the event you are sued for being legally liable should personal information of others be compromised or destroyed.

Q: I’m not a major corporation, do I really need data protection liability insurance?

A: The 2012 Data Breach Investigations Study by Verizon shows that in 855 data breaches they examined, 71 percent occurred in businesses with fewer than 100 employees. You do not need to be a large company for a data breach to happen. Every company is susceptible to cyber security issues, and small companies may be a bigger target based on limited resources to protect data.

Q: Do I need D&O insurance?

A: Directors & Officers insurance is a form of managerial malpractice liability insurance. It covers wrongful acts or decisions by those who run a corporation. Potential suits can come from employees, customers, or competitors.

Q: How can I protect myself from lawsuits related to the NYS Scaffold Law?

A: Consider consulting with legal counsel to make sure that you have enforceable hold-harmless language in your contracts. Additional insured status should be requested from those who are required to indemnify and defend you in the event you are made part of a lawsuit.

Q: How do I insure my customers vehicles while they are in my shop for service?

A: Garagekeepers legal liability coverage is designed to protect you if you are found to be legally liable for damage to your customers’ vehicles while in your care, custody or control.

Q: Why should I work with Lawley Insurance instead of my insurance carrier directly?

A: Lawley Insurance provides consultative services in evaluating your insurance and risk management needs and recommending coverages that respond to those needs. We have relationships with several national and regional insurance companies and act as your advocate in negotiating the best terms, conditions and pricing available.

Q: Does property insurance cover me in the event of a flood, fire or earthquake?

A: Most property policies exclude flood and earthquake, depending on the location of the insured property. FEMA provides flood coverage up to $250,000 for buildings and $100,000 for contents. Some carriers will provide excess flood coverage under their standard policies.

Q: What if a tenant causes damage to my building?

A: Your coverage should insure the entire building shell (drywall and out). If property damage is caused, it is most likely the owner’s policy would respond and then the insurance carrier would subrogate against the tenant’s policy. You should review your lease to determine your responsibilities.

Q: How do I protect my properties from vendors and/or tenant liability?

A: It is important that you understand risk transfer, which is something your broker should be able to help explain. Your broker should be able to review all vendor certificates of insurance and advise on how best to transfer liability annually. Any contracts or lease agreements you have should be reviewed by your attorney or broker. If you need assistance with any of these areas, feel free to contact the Lawley Insurance Real Estate Insurance team here.

Q: Does my small business need insurance?

A: Yes. Not having insurance – or not having the right kind of coverage – can put your small business at serious risk. Without the adequate levels of insurance, a fire, theft, cyber security breach, employee accident, or lawsuit could cause your business to close and could possibly even consume your personal assets.

Depending on the type, your business may be legally required to carry certain kinds of insurance. For example, if you have employees, your state may mandate that you carry workers’ compensation coverage, or you may have to prove you have specific types of coverage in order to get a state or local business license. Also, business people such as landlords or suppliers may require you to have and show coverage as part of a contract. For a free assessment on what coverages you may need from a small business insurance expert from Lawley Insurance who can help evaluate and explain your needs, click here.

Q: What can I do to keep my insurance costs under control?

A: Risk management is one of the best ways to control your business insurance costs. With risk management, you determine the probability of your business facing a loss, and consider whether or not it needs coverage for that loss. The Lawley Risk Management department works with large companies to assess and mitigate risks, and these tactics can be replicated for small businesses to ensure they are properly protected.

Our risk management team can help you identify sources of potential losses and evaluate the financial risk posed by each exposure. Next we would help determine how to handle and mitigate the risk then monitor the results. By using risk management to avoid or reduce losses, you can lower your number of insurance claims. This, in turn, lowers your rates, which are based on your claim history. For more information on risk management, click here.

Q: How often should I review my insurance policies?

A: A business’ insurance needs can change frequently. As you add staff or locations, your coverage needs will change as well. You want to protect your business by not being underinsured or by paying for excess coverages. Lawley recommends reviewing your insurance policies and premiums at least annually to ensure they still meet your growing needs.

Q: Isn’t cyber liability insurance covered by my general liability policy?

A: No. Most property policies will cover direct physical loss to your computers, but not any data stored within them. Intellectual property rights are usually excluded as well.

Many states require a breach to be reported should any personally identifiable information be leaked. Companies who fail to report that data breach are subject to large fines. For an assessment to determine if you are properly covered for cyber liability, click here.

Q: How does a private benefits exchange differ from my current benefits plan?

A: A private exchange relieves the employer of the burden of choose a limited number of benefits and plans for their employees. Our private employee benefits exchange, offers several options for a variety of programs, including medical, life, dental, and more. For more information, please contact us.

Q: Is a private insurance exchange right for my business?

A: We offer a variety of plans for small, mid-sized and large companies. Contact us for more information on how we can help your assess your benefit program.

Q: What is the difference between public and private exchanges?

A: A public exchange limits your coverage options to medical insurance only. If you qualify, you may be eligible for tax subsidies. Private exchanges do not offer the tax subsidies but do offer a variety of coverages in addition to medical.

Q: Should I be concerned about Healthcare Reform?

A: There are several factors that come into play to determine an organization’s level of exposure. If you have not done so already, a Healthcare Reform analysis will help to evaluate the exposure and level of risk your organization may have. If you would like to discuss this with a healthcare reform expert, click here.

Q: How can I determine what type of employee benefits plan I need?

A: Finding the plan that works best for both you and your employees is a matter of determining the type of coverage you need and how that aligns with your budget.

Some health insurance plans deliver copayment coverage for most routine needs: annual physicals or monitoring health conditions. A plan with copayments may cover doctors’ visits and prescriptions with a known copayment. The premiums for these plans reflect this level of coverage.

Other insurance plans offer a higher deductible, which can result in lower premiums, but require higher out-of-pocket costs until the deductible and any coinsurance thresholds are met. This type of plan provides coverage for significant medical expenses and can be right for people who don’t anticipate needing to see the doctor frequently. To speak to a health insurance expert about your individual business’ needs, click here.

Q: Is a construction bond anything like insurance?

A: A bond is NOT insurance. Insurance is a 2-party obligation between the insured party and the insurance company. Insurance assumes risk determined by a “risk factor” or class of business. A surety bond, although issued often by a division of a large insurance company, is a three-party obligation between the Contractor, Surety company and Obligee (the entity requiring the bond such as the city or state) and is underwritten with zero risk factor and determined on an individual basis rather than a pool. Basically, the surety is “guaranteeing” that the contractor requesting the bond on behalf of the oblige will perform the job and pay all parties involved.

Q: Can Small, Minority or Women-Owned Businesses benefit from a Surety Bond?

A: ALL Contractors can benefit from obtaining a bonding line. This shows the oblige or potential client that they have been thoroughly evaluated and have the ability to post a bond to protect the owners project. This often gives small contractors the advantage they need to compete against larger contractors.

Q: What is indemnity under a surety bond?

A: The indemnity agreement is the legal document that fully discloses the Principal’s obligations in a surety relationship, which allows the Surety the right to recover any losses paid out on behalf of a Principal. Under the bond, the Principal is the primary responsible party and must agree to reimburse the Surety for any claims or expenses they incurred because the Principal has not lived up to their agreement.

Q: Do all insurance companies offer Pay as you Go?

A: No—As an indedpendent agent, Lawley works with an array of carriers and we can help you choose the carrier that best fits your priorities.

Q: Do I still have to make a downpayment if I use Pay as you Go?

A: No—Your premium payments begin with the first reported payroll cycle, and are based on the reported payrolls instead of a structured installment plan.

Q: Will I still have an audit at the end of the year?

A: Yes—There are items such as subcontractors’ proof of insurance that have to be audited. However, you will have reported your own payroll and paid for that actual premium throughout the year, so there will be no audit adjustment on your own payroll actual vs. estimated.

Q: Do I have to work with a payroll service to use Pay as you Go?

A: No—You can do your own payroll reporting and premium remittance if you do not wish to use a payroll service. However, payroll services offer a variety of services, and if you are already using a payroll service it is easy to add Pay As You Go to the roster. If you are not using a payroll service, it may be worth investigating and weighing the services they can offer against the time and resources you currently invest in these tasks.

Q: What physician network will be available to our employees?

A: Since healthcare services are delivered on a regional basis we review the zip codes of your employees and recommend using a network that gives them access to a robust network of hospitals and physician services.

Q: How are my company’s costs and exposures determined?

A: Our underwriting process includes evaluation your Risk Profile which includes, your demographics, health plans, claim history, and rate history. Each company that joins is evaluated on a stand-alone basis.

Q: Who handles enrollment, employee questions, etc.?

A: Lawley acts as your benefit consultant, helps you with benefit design, strategy, and open enrollment activities. They also provide benefit compliance, underwriting and wellness program support from our team of specialists.

Q: What impact will there be to my employees?

A: The health insurance captive solution is really just a better way to finance your health insurance program. Employees received the same benefits, coinsurance, copays, deductibles etc. The biggest change is getting a new ID card and being offered a new Wellness Program incentive.

Q: Is there an upfront fee to join?

A: There is no upfront fee to join.

Q: What if I want to leave after the first year

A: This is a long term strategy that has to fit with your overall business plan. Companies can join and leave at any time. In the event a company leaves, they would not be eligible for a surplus distribution. There is no penalty to leave.

Q: Are there different types of wellness programs?

A: Yes. Wellness programs fall into two categories: participatory and health-contingent. Participatory wellness programs either do not provide a reward or do not include any conditions for obtaining a reward that are based on an individual satisfying a standard related to a health factor. Examples include (1) programs that reimburse employees for all or part of the cost of a fitness center and (2) diagnostic testing programs that provide a reward for participation and do not base any part of the reward on outcomes.

Health-contingent wellness programs require an individual to satisfy a standard related to a health factor to obtain a reward.

Q: Do you have an employee or team dedicated to Employer Wellness and Health Management?

A: We currently have three full-time Wellness and Health Management specialists and one part-time consultant on our team to support our clients’ wellness and health management needs. The team has over 35 years of combined industry experience in designing, coordinating and implementing wellness and health management programs. Each member of the team has a minimum of a Bachelor’s Degree and experience in a health-related field including Health Promotion, Health Education, Exercise Science and Psychology. Each team member holds wellness designations including C.W.P.M. (Certified Wellness Program Manager through the Chapman Institute), C.H.E.S. (Certified Health Education Specialist through the National Commission for Health Education Credentialing), C.W.C. (Certified Wellness Coach from Wellcoaches), WELCOA (Wellness Councils of America Well Workplace Training). Our team members attend national conferences bi-annually.

Q: What type of support can I expect from Lawley Insurance on my Wellness & Health Management Program?

A: Our Wellness and Health Management Specialists will work with each client on their specific individual wellness needs. They will assist in planning, collection of data, communication campaigns, coordination of interventions and evaluating outcomes. The specialist will attend wellness committee meetings, manage relationships with vendors, support wellness fairs and develop programs as needed.

Q: How much does the Lawley Insurance Wellness & Health Management Program cost?

A: As a value added benefit of being a Lawley client, there is no cost for the support of our Wellness & Health Management Specialist. If a client partnered with a vendor to offer an on-site health screening or coordinated on-site chair massage at a wellness event, fees would apply. Fees vary based on the service provided.

Q: If I receive a notice from the New York Compensation Insurance Rating Board saying I need to undergo a Compulsory Workplace Safety and Loss Prevention Program, what do I need to do?

A: What you received is also known as a Code Rule 59 request. This is a mandatory New York State program if your experience modification is 1.21 or greater and your payroll exceeds $800,000. A comprehensive safety program audit must be completed and you need to comply with the recommendations submitted or be subject to a penalty imposed by the NYS. We can help you navigate this requirement with assistance ranging from requesting your carrier to do the audit to providing the audit and summary report through our Risk Management department. Visit our Risk Management Services section for details and contact information.

Q: I understand New York State is offering premium discount for a safety program. Can you give me more information on this?

A: New York has recently established the Workplace Safety and Loss Prevention and Incentive Program (WSLPIP). You can receive premium credits for having qualified Safety, Return to Work and/or Drug and Alcohol programs. Lawley is certified to perform the evaluations of all three programs and can assist in submitting your application to the State.

Q: We are concerned OSHA is going to visit our facility. What can we do to be prepared?

A: Lawley Risk Management can provide a number of things including a mock OSHA audit and report, written program review and physical hazard assessment. These and other OSHA services can help bring your company into compliance with the latest OSHA requirements. Visit our Safety & Environmental Services section for further details.

Q: I have “Replacement Cost” on my building and contents. Why do I not get the full replacement amount when I have a claim? The adjuster only paid me the depreciated value of the claim.

A: The claim settlement is initially based on actual cash value. Once the damaged item or items are repaired or replaced the carrier will pay the amount held back at the time of the initial settlement. Note if the item or items are not replaced the carrier will not make any further payment.

Q: How do I protect my company against identity fraud?

A: One important way to protect yourself is to learn how hackers invade data bases. There are many risk management tools available to assist companies, including firewalls and secure websites. Specialty insurance companies have developed Cyber Liability policies to protect businesses in the event protected information is invaded and made public.

Q: What can I do to control my workers’ compensation costs?

A: Claims drive workers’ compensation costs. The best way to control claims costs is to identify how and why claims occur. A loss analysis can pin point the type of accident, location, time of day, occupation, etc. Once the causes are known, you can implement an employee safety program. Lawley Insurance Risk Management performs loss analyses for our clients.

Q: Must I have workers’ compensation insurance?

A: If you do not have any employees, you do not need to purchase workers’ compensation insurance. However, as soon as you employ an individual, you will need this type if insurance. State laws regarding workers’ compensation insurance vary, so talk to your insurance agent to learn about your responsibilities.

Q: Should I buy insurance from the rental car agency when I rent a car?

A: If you have a New York auto policy insuring your own car for physical damage (comprehensive and collision) there is no need to purchase insurance from the rental agency. By law, your policy must cover you for all obligations assumed by you for damage to the rental vehicle.

Q: I’ve heard that there are a growing number of lawsuits targeting individuals who blog or post allegedly libelous material on the Internet. Are these types of claims covered under a standard, unendorsed homeowner policy?

A: The liability insuring agreement under nearly all homeowners policies pays for damages arising only from bodily injury or property damage, not from any type of personal injury, such as libel. In most cases, the only way that these claims might be covered is if the insured’s homeowners policy includes a personal injury endorsement. You should check with your agent to determine if your insurance company offers this type of coverage.

Q: What should I do if I am involved in an automobile accident?

A: Here are seven dos and don’ts if you are involved in an auto accident:

1. Warn approaching traffic.
2. Get help for anyone injured.
3. Get witnesses’ contact information before they leave.
4. Do not discuss details of insurance coverage.
5. Do not argue over who is at fault.
6. Get details concerning the other vehicle and driver from the registration and drivers license.
7. If a police report is required, obtain a copy and the report number.

Q: If I let someone drive my car and they have an accident, who is responsible?

A: The insurance follows the vehicle; the accident follows the driver. Therefore, the owner’s insurance will respond and the accident will be attributed to the driver and will appear on their motor vehicle record.

Q: My children are going away to school and will be living off campus. What insurance coverage will they need?

A: Your homeowner’s policy includes off premises coverage up to 10% of your personal property limits. If your student will be living in a dorm, this coverage limit may be sufficient to cover all of your clothing and personal belongings. Laptops and other expensive electronics can be insured under a personal articles floater.

If the student is living off campus, you should consider a tenant’s policy, which will cover personal property and liability. If a visitor is injured while visiting your student, you may be subject to a lawsuit. Tenant’s liability covers defense and settlement costs. Talk to one of our personal insurance associates who can help you with this.

Q: How do I choose an insurance deductible?

A: In general, you should always select as high a property deductible as you can afford. If you do not intend to submit a claim for under $500, then you should elect a $500 deductible.

Q: How much liability insurance do I need?

A: Liability policies provide coverage for defense and settlement costs. Defense coverage is unlimited in most cases. There are a variety of settlement limits. Consider purchasing sufficient coverage to allow you to maintain your assets.

Q: Can I purchase coverage for identity theft?

A: Many homeowners’ insurance policies include a limited amount of coverage for identity theft. Coverage includes the cost to correct your records and restore your credit rating. The coverage does not replace your lost funds; banks and credit card companies will work with you to restore these funds or remove the unauthorized charges.

Q: Why does the insurance company require me to carry more coverage than my home is worth?

A: Property coverage limits are based on the cost to replace or repair damaged structures. Replacement cost policies give you “new” in exchange for damaged “old”. The insurance values are based on construction costs in your region. There is no correlation between an insurance valuation appraisal and a market appraisal done for real estate sales or financing.

Q: I have replacement coverage for contents under a homeowner’s policy. Some of my property has been stolen. Can the company settle for an amount less than replacement?

A: The company will usually pay the actual cash value, which is replacement cost minus depreciation, for the loss or damage- until the property is replaced. Once the insured replaces the damaged property and provides receipts to the company, the company should reimburse the difference.

Q: Does my homeowner insurance policy cover flood damage?

A: Generally, homeowner insurance policies do not offer protection against flood losses. Check your policy under Section I- Exclusions; it would be listed under “water damage”. You can purchase a separate policy for flood damage. To see if you need a flood insurance policy, contact our homeowners’ insurance team here.

Q: What is credit scoring?

A: A credit score is a snapshot of your credit at one point in time. The credit information from your credit report is put through a mathematical formula (credit scoring model) that assigns weight to the various factors and summarizes your credit information into a three digit number ranging from 0 to 999.

Q: How is credit scoring used by insurance companies?

A. If your insurance company relies on credit scoring, they may use it in two ways. First: underwriting; that is, deciding whether to issue you a new policy or to renew your existing policy. Second: the process of rating, which is deciding what price to charge you for your insurance by placing you into a specific rating “tier” or level. Some insurers combine credit information with other more traditional rating factors, such as claims history. Other insurers may use credit scoring alone to determine your rate. Insurance rates based on credit information can vary from company to company. If you think your rate is too high, shop around.

Q: What affects a credit score?

A: Several factors determine credit scores. Each factor is assigned a weighted number that, when applied to your specific credit information and added together, equals your final three-digit score. Following is a list of common factors: Major negative items (bankruptcy, etc.), past payment history, length of credit history, homeownership, inquires for credit, number of open credit lines, type of credit in use and outstanding debt.

Q: What is the difference between comprehensive and collision?

A: Comprehensive and collision are components of physical damage coverage. Collision coverage is activated when your vehicle is damaged while in motion, such as hitting a post in a parking lot or colliding with another vehicle. Comprehensive coverage is activated when the vehicle is not being driven, such as fire or theft. Physical damage coverage applies to your vehicle.

Q: How does my driving record affect my insurance premium?

A: The premium you pay is a direct reflection of your driving record for the past three to five years, depending on the insurance company’s underwriting rules. Insurance companies order driving records from the DMV of your resident state and from other states where you have been licensed. Statistics show that drivers with tickets and past accidents are more likely to have accidents than drivers with clean records.

Q: My teenager just got his license, but I do not allow him to drive my car. Does he need to be insured?

A: In most cases, yes. Automobile insurance policies require every licensed person in your household to be listed on your insurance policy unless they have their own vehicle and are insured under a separate policy of their own. This includes a teenager who just received this license or a college student who still uses your address as their residence and/or visits regularly on weekends, vacations, etc.

Q: What is personal liability insurance coverage?

A: Personal liability coverage provides defense in the event you are alleged to be negligent and damages if you are found negligent in causing a third-party to suffer bodily injury or property damage. Those covered include yourself and all residents of your household.

Q: What does medical payments insurance cover?

A: Regardless of fault, this coverage pays the reasonable expenses for others who are accidentally injured on your premises or the areas immediately adjoining your property such as sidewalks or alleys. Medical payments coverage does not apply to your own injuries or those of family members living with you or injuries arising out of activities involving a business that you operate out of your home, your intentional acts, or rental use of your premises.

Q: What is replacement cost?

A: Replacement cost is the amount necessary to replace or rebuild your home or repair damages with materials of similar kind and quality without deducting for depreciation. You receive new materials that replace old, damaged items or property.

Q: What is actual cash value?

A: Actual cash value is the cost at the time of the loss to repair or replace the property destroyed, less depreciation. Most standard home insurance policies cover the contents of your home (i.e., personal belongings) on an actual cash value basis, but it is possible to buy replacement cost coverage.

Q: What should I do if my premium increases and I want to get quotes from other companies?

A: Lawley Insurance represents many insurance companies and will survey the market on your behalf .

Q: How can I get a lower premium?

A: Strongly consider a higher deductible. You are best served by absorbing small claims. In the current insurance market, many insurers now refuse to renew polices or accept new customers with a history of several small claims. View your homeowners insurance as catastrophic coverage and set aside your premium savings to cover minor repairs.

Q: Can you buy flood insurance if you are located in a high-flood-risk area?

A: Yes, you can buy National Flood Insurance no matter where you live if your community participates in the National Flood Insurance Program. Under the National Flood Insurance Act, mortgage lenders must require borrowers whose property is located within a Special Flood Hazard Area to purchase flood insurance as a condition of receiving a federally regulated mortgage loan. National Flood Insurance is not available in designated Coastal Barrier Resources System areas, which are shown on a community’s Flood Insurance Rate Maps.

Q: Can you buy flood insurance immediately before or during a flood?

A: You can purchase flood coverage at any time. There is a 30-day waiting period after you’ve applied and paid the premium before the policy is effective, with the following exceptions:

• If the initial purchase of flood insurance is in connection with a loan, there is no waiting period. The coverage becomes effective at the time of the loan, provided application and payment of the premium have been made
• If the initial purchase of flood insurance is made during the 13-month period following the effective date of a revised flood map for a community, there is a one-day waiting period for any structure within an area that is shown as being in an Special Flood Hazard Area for the first time
• The policy does not cover a “loss in progress,” defined by the National Flood Insurance Program as a loss occurring as of 12:01 a.m. on the first day of the policy term. In addition, during a flooding event, you cannot increase the amount of insurance coverage you have

Q: Does my homeowners’ insurance policies cover flooding?

A: Unfortunately, many homeowners do not find out until it is too late that their homeowners’ policies do not cover flooding.

Q: Is flood insurance only available for homeowners?

A: Flood insurance is available to protect owners and renters of homes, condominiums, apartments and nonresidential buildings, including commercial structures. A limit of $250,000 of building coverage is available for single-family residential buildings or for residential condominium units. Contents coverage on residential buildings is limited to $100,000, which is also available to renters. Commercial structures can be insured to a limit of $500,000 each for the building and contents. These limits are subject to change.

Q: Can you buy flood insurance if your property has been flooded before?

A: Yes, you remain eligible to purchase flood insurance if your home, apartment or business has been flooded before, as long as your community participates in the National Flood Insurance Program. Flood insurance premiums do not go up as a result of your claims history.

Q: Can you buy flood insurance if you are not located in a high risk flood area?

A: Yes. Even if you live in an area that is not flood-prone, it’s advisable to have flood insurance. About a quarter of the National Flood Insurance Program’s claims come from outside high flood risk areas. The Program’s Preferred Risk Policy, available for just over $260 per year for $100,000 of coverage, is designed for residential properties located in low-to-moderate flood risk zones.

Q: Why would properties outside of mapped flood hazard areas be subject to floods?

A: Flood Insurance Rate Maps show areas which are subject to predictable flooding from streams, lakes or tidal waters. Areas within one square mile of a stream’s headwaters are usually not mapped. Due to the unpredictable nature of some kinds of floods, maps also don’t show many areas subject to flooding from localized drainage problems, ice jams, or sheet flooding down a slope. Maps are based on the “100-year” flood, better thought of as the flood that has a one percent or greater chance of occurring in any given year. Larger floods can and do happen.

Q: Can National Flood Insurance Program flood insurance be purchased through private insurance agents?

A: Yes, this flood insurance is sold through private insurance companies and agents, and it is backed by the federal government. To find out more, talk to one of our flood insurance consultants here.

Q: Does the National Flood Insurance Program offer any basement coverage?

A: Yes, it does. The program defines a basement as any area of a building with a floor that is below ground level on all sides. Flood insurance does not cover basement improvements, such as finished walls, floors or ceilings, or personal belongings such as furniture and other contents. It does cover structural elements, essential equipment and other basic items normally located in a basement, as well as cleanup costs. Many of these items are covered under building coverage, and some are covered under contents coverage.The following are covered under building coverage, as long as they are connected to a power source and installed in their functioning location:

• Sump pumps
• Well water tanks and pumps, cisterns and the water in them
• Oil tanks and the oil in them, natural gas tanks and the gas in them
• Pumps and/or tanks used in conjunction with solar energy
• Furnaces, hot water heaters, air conditioners, and heat pumps
• Electrical junction and circuit breaker boxes and required utility connections
• Foundation elements
• Stairways, staircases and elevators
• Unpainted drywall and Sheetrock walls and ceilings, including fiberglass insulation
• Clothes washers and dryers, food freezers and the food in them

Q: Won’t federal disaster assistance pay for flood damage?

A: Not really. Before a community is eligible for disaster assistance, it must be declared a federal disaster area. Federal disaster assistance declarations are issued in less than 50 percent of flooding incidents. Most federal disaster assistance is in the form of loans. The premium for an National Flood Insurance Program policy, averaging a little more than $350 a year, is typically less expensive than a single monthly payment on a federal disaster loan. Furthermore, if you are uninsured and receive federal disaster assistance after a flood, you must purchase flood insurance to remain eligible for future disaster relief.

Q: Does the National Flood Insurance Program encourage risky development?

A: One of the program’s primary objectives is to guide development away from high-flood-risk areas. Program regulations minimize the impact of structures that are built-in special Flood Hazard Areas by requiring them to not cause obstructions to the natural flow of flood waters. Also, as a condition of community participation in the National Flood Insurance Program, those structures built within Special Flood Hazard Areas must adhere to strict floodplain management regulations.

Q: What type of flooding does National Flood Insurance cover?

A: The program defines covered flooding as a general and temporary condition during which the surface of normally dry land is partially or completely inundated. Two properties in the area or two or more acres must be affected. Flooding can be caused by:

• The overflow of inland or tidal waters
• The unusual and rapid accumulation or runoff of surface waters from any source
• Mudslides, i.e., mudflows, caused by flooding, that could be described as a river of liquid and flowing mud; or
• The collapse or destabilization of land along the shore of a lake or other body of water, resulting from erosion, the effect of waves, or water currents exceeding normal, cyclical levels.

Q: Is wind-driven rain considered flooding?

A: No. Rain entering through wind-damaged windows, doors or a hole in a wall or the roof, resulting in standing water or puddles, is considered windstorm, rather than flood damage. National Flood Insurance covers only damage caused by the general condition of flooding (defined above), typically caused by storm surges, wave washes, tidal waves, or the overflow of any body of water over normally dry land areas.