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Guest view: 3 tips on getting the right flood insurance

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Theresa Kane, director of insurance services at accounting firm Boyer & Ritter
Theresa Kane, director of insurance services at accounting firm Boyer & Ritter - (Photo / )

If your building is in a 500-year floodplain, is it time to breathe a sigh of relief and think, “One storm every five centuries, I'm pretty safe?”

Unfortunately, the answer is probably not.

A 500-year storm just means there’s a 1 in 500 chance of getting deluged. If you live in the 100-year floodplain, the 1 in 100 odds of getting hit by a big storm in any given year is only slightly less than being in a car accident. Even if you have coverage, standard flood insurance may be woefully inadequate for your businesses, and content reimbursement may come down to “base flood elevation.’’

We’re all familiar with the fallout from Hurricanes Harvey, Irma and Maria, but we’ve seen unprecedented flooding closer to home. In 2011 Tropical Storm Lee dropped a foot of rain in Dauphin County and caused $200 million in uninsured losses. The Swatara Creek flooded neighborhoods in Hershey for the first time after swelling to a historic 27 feet.

In light of all this, I advise buying flood insurance regardless of whether your property is in a high-risk zone. Here are three critical tips to help you figure out what you need and to avoid any nasty surprises:

Acronyms to know: FEMA and NFIP

In the U.S., the National Flood Insurance Program, or NFIP, sells flood insurance. It is part of the Federal Emergency Management Agency, or FEMA, which creates the flood zone maps used to determine risk.

Premiums for buildings in flood-prone areas can be expensive, but coverage for properties in non-risk areas can be less than $200 a year.

Deductibles can range from $500 to $10,000 and, in general, commercial coverage provides up to $500,000 for building damage and the same amount for contents ($250,000 and $100,000 for residential).

But that’s not as clear-cut as it sounds. Coverage can also vary depending on the kind of commercial building (nursing homes, mixed-use residential and retail, etc.) as well as differences between single-family homes and condos, for example. Checking out www.floodsmart.gov is a good place to start, but make sure you talk to an insurance professional who is certified to sell flood insurance.

One size doesn't fit all

Especially for businesses, the NFIP limits may be insufficient. A large office building or factory that suffers foundation damage will likely cost more than $500,000 to repair.

The answer is excess flood insurance, predominantly sold by Lloyd's of London. This coverage kicks in after you meet the NFIP limits and is a good option for companies that could see millions in losses. Policies start around $10,000 a year.

Additionally, NFIP doesn’t sell business interruption insurance — private insurance is your only option. Keep in mind, however, that it only covers you until your business can run again. But it won’t cover losses if revenue is down because your entire region is affected.

Elevation matters

If you have property in a flood zone, the first rule is, “Don’t fix up the basement or use it for storage.’’ Flood insurance will cover mechanicals such as air conditioners and furnaces, but it won’t pay for most personal or business property.

Less obvious is the need to make sure your equipment or personal property isn’t below “base flood elevation.’’ In low-lying areas, that could easily encompass the first floor. Whether you own or are renting space, you won’t get reimbursed for content losses below the base flood elevation.

You may have to check with the municipality or, especially if you’re looking to buy, have a surveyor determine the elevation.

Bottom line

While there’s a lot of information online, make sure you talk to an agent certified to sell flood insurance. It also makes sense to have an expert conduct an independent review of your insurance. The expert can examine your vulnerabilities in all areas and recommend the type and level of coverage you need.

Flooding is increasingly surprising people who were always high and dry. For most of us, flood damage is looking like a “when”, not “if,” possibility.

I recommend homeowners and businesses alike have flood insurance, and the time to get it is now. It takes 30 days to activate, so don’t wait until a storm is barreling toward you.

Theresa Kane is director of insurance services at accounting firm Boyer & Ritter, which has offices in Camp Hill, Carlisle, Chambersburg and State College. She is a certified insurance counselor who provides unbiased insurance review services. She can be reached at 717-761-7210 or tkane@cpabr.com.

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