Insurance agents and brokers say calls from homeowners inquiring or applying for flood insuranceâ€”which isnâ€™t included in standard homeownerâ€™s-insurance policiesâ€”have picked up since Sandy hit the East Coast in October. Most of the demand is coming from clients in Connecticut, New Jersey and New York.
For luxury homeowners in particular, buying flood insurance is often a two-step process. First is the basic policy, which is largely provided by the federal National Flood Insurance Program and covers up to $250,000 to rebuild a home and up to $100,000 in contents. Since this amount falls short of the coverage needed for upscale properties, a growing number of these owners are looking into so-called excess or supplemental flood coverage.
Rich Aronwald used to have excess flood insurance on his $1.5 million summer home on Long Beach Island, N.J. He stopped paying his $1,200 annual premium in July because the bill kept rising even though he never filed a claim. But after seeing the damage the island incurred, heâ€™s asking his insurance agent about a new excess policy to protect his home from future losses. Mr. Aronwald, a 48-year-old financial planner from Bernardsville, N.J., says he wants to be prepared â€œin case the next storm is twice as bad as Sandy.â€
Since Sandy made landfall, PURE Insurance, one of a small number of private insurers that offer such policies, has had a roughly 10% to 20% increase, or several dozen more applications, for excess flood insurance from homeowners in the Northeast, says Martin Hartley, chief underwriting officer at the company. New York-based insurance broker Personal Risk Management Solutions, which provides add-on flood policies from other luxury insurers, including Firemanâ€™s Fund Insurance Co. and the ACE Group, says about 10% of its clients who previously passed on flood coverage are asking to revisit it. Insurance broker CBS Coverage Group, based in Plainview, N.Y., says it has had at least a 25% increase, or roughly 200 more homeowners signing up for supplemental flood policies.
â€œWe are absolutely without a doubt seeing a consumer who is much more aware of this flood issue [and] we are going to see sales increase,â€ says Spencer Houldin, president of Ericson Insurance Advisors, an independent insurance agency.
To get started, homeowners purchase basic flood coverage through the NFIPâ€”policies are sold through private insurers. Then they can sign up for an add-on policy. (Some insurers provide both types of coverage depending on a homeâ€™s location.)
The extra coverage will vary by insurer, but it tends to include the basement, living expenses if the homeowners canâ€™t reside in the home post-flood, and an overall higher dollar amount of coverage based on the replacement cost of their home and belongings.
Premiums for these policies also vary depending on several factors, including the homeâ€™s likelihood of flooding and its cost to rebuild. For instance, premiums will run about $1,200 a year for a home located a few blocks away from the beach in New Yorkâ€™s Hamptons with an excess flood policy valued at $1.8 million, says Celia Santana, president and CEO at PRMS. But if that home is on the beach, annual premiums will run about $6,700. Before buying, here are a few other points to consider:
- Caps on policies: Excess flood policies often come with their own limitations. Some insurers place a cap on how much theyâ€™ll pay out for the infrastructure and contents destroyed in a basement. Also, there can be limits on coverage for business property, like computers used for work purposes, in the home.
- Protection for valuables: Flood damage to some belongings, like furs, jewelry and silverware, typically isnâ€™t covered by excess flood policies. Instead, individuals will need to get a separate policy, referred to as a â€œvaluable-articles policy,â€ on those items. Some excess flood policies may cover fine art and antiques.
- Multiple insurers: When homeowners have all their policiesâ€”homeownerâ€™s as well as basic and excess floodâ€”through the same insurer, theyâ€™re likely to hit fewer obstacles in receiving their payout for a claim. Ms. Santana says her clients with this setup received their check for flood damage two weeks after Sandy, while many dealing with separate insurers are still waiting.