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What are some differences between the NFIP General Property Form vs. other property coverage forms?

-ACV valuation basis and no option for replacement cost for commercial risks -No coinsurance -Only specific insurance, no blanket coverage -No coverage for loss of use (Business income, extra expense) or personal property of others -Separate deductibles apply to building and personal property

How do communities become eligible for NFIP?

-Development of flood insurance rate maps (FIRMs) to determine special flood hazard areas (SFHAs) -Introduction and enforcement of floodplain management plans

What are the two NFIP programs and how are they different?

-Emergency program - initial phase for a community. Rates are subsidized and amount of insurance is lower. Need plan for flood management and FIRMs -Regular program (has higher limits of insurance)

What are the differences in flood coverage under the ISO flood endorsement and NFIP?

-ISO allows for replacement cost coverages for businesses -Broader property coverage regarding building types -Increased limits -Additional loss exposures covered include loss of use

What are the goals of NFIP (National Flood Insurance Program)?

-Meet the unmet demand for insurance since private insurers exclude flood due to high catastrophe risk (high correlation of losses) -Alternative for (repetitive) disaster assistance -Encourage local land management practices to reduce future flood damage

What are property exclusions in the ISO Flood Coverage Endorsement?

-Property in the open unless scheduled -Boat houses on water -Bulkheads/retaining walls and piers/docks/wharves -NOTE: Foundations and underground pipes/flues/drains ARE covered

Highly Protected risk (HPR)

A large property whose construction and management meets high standards of risk mitigation and control. These unique exposures may be offered insurance on generous terms

Write Your Own (WYO)

A program allowing private insurers to write flood insurance under the National Flood Insurance Program (NFIP). Private insurers sell and service NFIP policies, but any losses are paid by the federal government

What are the advantages of Differences in Conditions (DIC) insurance?

Cheaper alternative for covering flood/earthquake vs. endorsements No coinsurance Easier to modify given lack of standard contract

What distinguishes the two versions of the Earthquake and Volcanic Eruption Coverage Endorsement?

Coinsurance form - Same limit (and coinsurance) as underlying policy. Deductible is a % of policy limit. Sublimit form - Lower limit and no coinsurance. Deductible is a % of property value. Introduces aggregate annual deductible

List the coverages in the NFIP General Property Form

Coverage A - Building (Fixtures, machinery and equipment must be listed) Coverage B - Personal (no coverage for PP of others, no coverage for property in basement) Coverage C - Other Coverages (including debris removal and loss avoidance measures) Coverage D - Increased cost of compliance (for repetitive loss structures)

Increased Cost of Compliance (ICC)

Coverage D under the National Flood Insurance Program that pays up to $30,000 for repetitive loss structures to alter the property to comply with local floodplain management laws (e.g., flood-proofing or land grading)

Emergency NFIP Program

Initial phase of a community's participation in the National Flood Insurance Program in which property owners in flood areas can purchase limited amounts of insurance at subsidized rates. This initial phase is required while flood maps are created and floodplain management ordinances are initiated in the area.

What are the disadvantages of Differences in Conditions (DIC) insurance?

Insurer coverage varies over time Uncertain interpretation by courts since no standard contract More negotiation (manuscript policy)

What are the disadvantages of layered property insurance?

Minimum premiums for each layer make cost savings questionable Coordination of language between layers can cause claim disputes Insurers prefer writing property and liability together Volatility of availability, especially after catastrophes

What are other exclusions (not property exclusions) in the ISO Flood Coverage Endorsement?

Ordinance or law Water induced landslides Sewer backup (unless flood induced) 72-hr waiting period after inception of endorsement Debris removal does not include removal of earth/mud on the grounds

Difference in conditions (DIC) policy [DIC Insurance]

Policy that covers on an "all-risks" basis to fill gaps in the insured's commercial property coverage, especially gaps in flood ad earthquake coverage or for excess property coverage

Regular NFIP program

Second phase of the National Flood Insurance Program in which the community agrees to adopt flood-control and land-use restrictions and in which property owners purchase higher amounts of flood insurance than under the emergency program

Attachment point

The dollar amount above which insurers in a layered program begin to cover losses

General Property Form

The name of the coverage form under National Flood Insurance Program (NFIP) which is used for insuring commercial buildings and contents

What are the advantages of layered property insurance?

Total premiums paid may be less than one limit for full amount of insurance No coinsurance allows for flexible limits Increased access to insurers can create more competitive terms

Layered Property Coverage

Two or more property policies arranged in levels of coverage; the policies in the second or higher levels provide coverage only when the loss exceeds the coverage offered under the lower layers

What are some uses of Differences in Conditions (DIC) insurance?

Used as open peril policy that fills gaps left by other coverages - including coverage for flood and earthquake Similar to umbrella policy providing excess (cat coverage over other property policies

Ensuing losses

When a covered loss under the flood or earthquake/volcanic eruption endorsements lead to other covered perils such as fire. In these cases, the insurer will not pay more than the limit on the underlying property coverage; this means that the limits on the endorsement and standard property policy cannot be added together)