Shelby County's own University of Montevallo (UM) is celebrating its 125th anniversary and this is really something worth noting. However, during this time a concern that doesn't look like affecting flood insurance surfaced; local restaurants and the general population of Shelby County are experiencing supply chain issues.

Today, we want to talk about what this could mean for flood insurance, its coverages, and what to expect as we celebrate the 125th anniversary of UM.

Supply Chain Issues

Local restaurants in the southern parts of Birmingham are having a rough start to the year as supply chain issues resurface. This is causing a lot of problems not just for food supplies, but even necessary utensils and such. From containers to equipment, business owners are having trouble handling the potential economic impact of the issues with supplies.

This issue is just a few weeks after President Joe Biden implemented a presidential declaration to help homeowners across Jefferson County, Mobile County, and Shelby County when it comes to recovering from the October 2021 flooding.

A local business owner, Naseem Ajlouny, shared with Shelby County Reporter how he's struggling with the supply chain issues. He quoted to have "spent around 30% of work now trying to source product". Moreover, there are also concerns with food supplies through crops such as the availability of corn on the cob and other protein products.

This is creating an increase in costs for menus across the county just to make ends meet. Worst case scenario, the item just has to be removed from the menu.

So what does this mean for flood insurance?

Supply Chain & Coverages

Now, when it comes to the concern of the supply chain, it's important to keep in mind that this doesn't just impact how businesses run. This also means that there may be unwanted impacts to flood insurance.

Let's all remind ourselves that Alabama, especially Shelby County, can be very prone to floods. There are a lot of flood hazards in the area which only contributes to the high-risk flood zones that the county is in when it comes to flood insurance rate maps (FIRM). So, this isn't really just a concern for business owners, but it can also impact homeowners.

You see, when it comes to flood insurance coverages, those replacement costs for recovering and rebuilding the building still need to come from sourcing out materials — the same goes for content coverages or the personal items included with the insured building.

If business owners are having trouble getting materials outside of flood insurance coverages and to keep their businesses afloat, what more when water starts overflowing from the floodplain?

This type of issue can cause a limited amount of coverage when it comes to additional living expenses from your flood insurance claim. This means that you won't really get an increase in premiums or payment, but you can expect to face higher costs when it comes to repairing the building.

When flood insurance covers the repairs or recovery of an insured building, the market can still have an impact on the costs of materials like wood, bricks, metal, and things like that. Since the county is experiencing some challenges with importing these things, it's safe to expect that there will be higher costs on the materials.

This could also mean that if you have that $250,000 standard coverage for your $200,000 home, it will easily be maxed out when you file a flood claim when the reparation begins.

Even if we say that you will get 100% coverage on the repair of your insured building, there will be no room for flood mitigation measures since the building coverage or replacement cost is already maxed out.

This can be very concerning especially since we're moving out of the winter season very soon and that also means that Alabama will face runoff from all directions. We've seen this happen before and it's not impossible to happen again. Despite the clearer skies in North Alabama, it's important to mention that Cullman County in the north-central areas of the state, faced 2 to 3 inches of rain in September before the October flooding.

Are you prepared to face possible flooding in the next few weeks?

If you have any questions on supply chains and flood insurance, how to review your insurance coverages, where to get flood insurance or anything at all, you can click our Flood Learning Center where we try to answer all your flood insurance questions.

You can also click below to call us and we can discuss your flood insurance needs.

Remember, we have an educational background in flood mitigation which lets us help you understand your flood risks, flood insurance, and mitigating the value of your property long-term. 

Homeowners across the country are faced with a lot of insurance policies needed to sustain their property and homes. This ranges from your standard homeowners' insurance policy to other damage insurances. 

Today, we want to address one of the most common questions with insurance that homeowners usually ask. Does water backup insurance cover flooding?

What is Water Backup?

First thing's first, we have to address the actual definition of what a water backup is. Generally, water backup pertains to the incident(s) when something blocks or stops the natural flow of drains from the pipes that exit your home. This could be sewer backups that are clogged due to debris, overflow of rainwater, or when a sump pump fails so it forces water into your home.

Basically, the water that's coming from your home but failed to get out. This area covers things like septic systems, sump pumps, and/or sewer systems. This time of damage actually has coverage from your insurance however do you still need flood insurance when you're already covered for water backup coverage?

Is Flood Insurance Necessary?

To understand the difference between these two coverages, we first need to go back and understand what floods actually are. Generally, flooding is any incident where surface water from outside of your home inundates your property. This may be due to a storm, continuous heavy rainfall, or coastal flooding.

You might say that they should be covered within a single policy since they are both water damages to your property or home. However, it's important to keep in mind that these two things are different coverages.

Even if you already have water backup coverage, unfortunately, this won't really get you covered if we're talking about flood damage. This also means that flood insurance won't cover you for water backup since most insurance companies in the industry will be considering that "Rule of Two".

The rule of two on flooding, according to FEMA, states that surface water will only be considered a "flood" if it impacts at least two acres of normally dry land or two properties within the same area. Considering that water backup has a smaller scale which only impacts a single homeowner, it doesn't really fall into the coverage of flood.

Now, let's talk about your flood insurance options.

Flood Insurance Options

The NFIP

The National Flood Insurance Program (NFIP) is purely managed by the federal government since this is FEMA's answer to flood insurance. An NFIP flood policy can get you flood coverage on both your dwelling and the contents within it.

When we say dwelling, this simply pertains to either the residential property or commercial building that you're trying to insure with NFIP and FEMA; contents will be more about the personal property and items you have inside the insured building.

There is a coverage limit when it comes to federal flood policies. Flood damage to buildings will be covered to a maximum of $250,000 for residential policies and can only go up to $500,000 maximum if it's for a commercial property. Regardless of the type of property you have written, you can expect to get a $100,000 maximum contents coverage from an NFIP policy.

READ: National Flood Insurance Program Risk Rating 2.0 Update

There's also what's called the Increased Cost of Compliance (ICC) coverage. This is a $30,000 additional coverage for your property in order to make sure that there are flood mitigation efforts made on the property according to the federal government's standards.

Generally, this can include sandbagging your property, installing floodproofing walls, raising your lowest floor from the base flood elevation levels, and putting flood openings. The labor that goes into making these mitigation efforts happen will also be covered under the ICC.

There are also perks with your participating community. A participating community gets access to federal flood insurance and disaster assistance by meeting their standards on flood mitigation and disaster preparedness. The efforts put in by a community won't be unnoticed as this can help on raising your Community Rating System (CRS) score.

The CRS measures and rewards the overall flood mitigation efforts done by the community according to FEMA's standards on floodplain management. Simply put, the higher your CRS score is, the bigger the flood insurance discount you'll get from FEMA and the NFIP.

You can start enjoying your NFIP policy after a 30-day waiting period from the flood insurance purchase.

The Private Flood

If the federal flood insurance option doesn't really work for you then you can manage this new floodplain mapping through the private flood insurance market. It's important to note that this market will solely be managed and provided by private insurance companies which generally means that the red tapes FEMA and NFIP has to go through won't be there.

The first thing you'll immediately see with the private flood market is that there are significantly shorter waiting periods for your flood policy. Once you have everything settled and paid for, the wait period for the private flood carriers will follow a much shorter timeframe compared to NFIP. A private flood insurance policy can take effect on 7 or up to 14 days maximum. 

Another good thing coming out of private flood insurance is that there are no coverage limits. This means that you won't really need to stress over how to get covered for a $500,000 home since it will be fully covered by your policy. This is the same with contents coverage and you'll also get additional coverages like replacement costs, additional living expenses, and loss of use.

Fair warning, it's a known issue in the private insurance market in general that they will do moratoriums when there are risks that are too high for their comforts.

This simply means that they will either put a stop or take a break from providing flood insurance policies to a certain area that has higher risks. There's also a chance that you might not get to buy flood insurance from them once they decide to non-renew your policy.

What Really Matters

Understanding your insurance coverage from a homeowners insurance policy, renters insurance policy, water backup insurance, and flood insurance is the key to ensuring that you bounce back from any possible damages due to natural disasters or lack of maintenance. You want to get yourself a good insurance agent who can help you explain these coverages and how they differ.

If you have any questions about flood insurance, insurance coverages, or anything related to floods, click the link below to access our Flood Learning Center where we try to answer your questions on flood insurance and beyond.

Remember, we have an educational background in flood mitigation and we want to help you understand flood risks, your flood insurance, and mitigating your property long-term. 

We've been doing a lot of updates for you when it comes to the changes on flood insurance rates per state and per city in those states. In those blogs, we've mentioned a lot about what stays and what changes in federal flood insurance once the new program kicks in.

Today, we'll do a deep dive on these changes with the National Flood Insurance Program (NFIP) policies itself, how it works, how you will be rated, and understanding how flood insurance will work with the new Risk Rating 2.0.

We want to talk about the specifics of how Risk Rating 2.0 or NFIP 2.0 will impact the coverages in flood insurance for both residential and commercial policies. So how will flood insurance coverage change with the new Risk Rating 2.0 program?

Risk Rating 2.0

First, let's discuss what this new program is all about. The Risk Rating 2.0 is a new setup for federal flood insurance under the Federal Emergency Management Agency (FEMA) that aims to provide policyholders across the United State a rating structure that eliminates any rating disparities and get people more accurate flood insurance rates with the National Flood Insurance Program (NFIP).

This new program is equity in action and will consider a lot of old and new rating factors when it comes to flood insurance. These factors and conditions are the things that the Risk Rating 2.0 will consider and can also help you determine if you're going to get a premium increase or rate increase just by looking at your property details. We'll talk more on the specifics in our future blogs on this, but to give a brief preview here are the things that impact your rate which will stay with the Risk Rating 2.0:

• Flood zone designation based on community flood maps.
• Distance of the property to a body of water.
• Prior flood insurance claims or history of flood claims made with the property
• Policy assumption and policy transfer.
• The grandfather rule.
• Pre-FIRM subsidies or Pre-Flood Insurance Rate Map discounts.

The new things that will also impact your rates. These things are more focused on individual properties, so there's a fingerprint of flood risk when it comes to the Risk Rating 2.0. This is to say that your rate won't be the same as your neighbors:

• Types of flooding that your property experience.
• Flood frequency impacting the community and your property.
• First-floor height or distance of the first livable area to grade (ground).
• Elevation of the structure or the property itself.
• Flood Risk Mitigation Measures made on the property.

Again, we'll talk more about these in future episodes, but for now, we want to focus on the impact on flood coverage so that property owners and insurance agents alike can get an understanding of this. One step at a time.

Flood Insurance Coverage 2.0

Now, we get to the hot stuff, what changes when it comes to flood insurance coverage with the National Flood Insurance Program under the Risk Rating 2.0?

Well, I have to break it to you, but so far nothing changes. Which doesn't mean that they won't change in the future. There's a lot of things coming into play when it comes to coverage amount or limits — I mean we're still going through a pandemic.

Generally, this means that residential and commercial properties will still get that coverage for flood damage on dwelling and contents. By dwelling, this means the insured building or your house itself whereas contents will be the things that are inside the dwelling. Let's get down to specifics for everyone's awareness.

Dwelling coverage from FEMA and the National Flood Insurance Program (NFIP) will cover the flood damage to the construction impacted by the flood like walls, ceilings, roofs, fences, floor surfaces, water heaters, furnaces, air-conditioning systems. This coverage will also include everything that goes into the cleanup and debris removal. The coverage for dwelling on residential properties is maxed at $250,000 however for commercial properties, this coverage is $500,000 maximum.

Contents coverage on the other hand is more concerned with the personal property you have within the insured dwelling or building. This means that you will get covered for a maximum amount of $100,000 for clothes, washers, dryers, television, furniture, and other personal belongings that were impacted by flood damage. This amount will be the same regardless if you're carrying a commercial or residential policy.

What's important to note about coverage is that there's still the Increased Cost of Compliance (ICC) which can make you legible for additional flood insurance coverage the NFIP. Quick disclaimer, you and your community will have to apply for this one in order to make sure that you're legible to get it. So what's this coverage you ask?

Increased Cost of Compliance

One of the things that won't change with the NFIP as the Risk Rating 2.0 kicks is the ICC or Increased Cost of Compliance. This coverage is something we can call additional since this is mostly provided at $30,000 maximum for policyholders and is intended to ensure that you will reduce the impact, if not the overall risk of flooding on the listed property. Generally, this involves flood mitigation efforts such as the installation of flood openings and the labor that goes into making that happen.

When Will Risk Rating 2.0 Happen?

It's important to know this information before you move into federal flood insurance or move to the private market. This new Risk Rating 2.0 program will change flood insurance policies across the United States starting this October 1st, 2021 for new business or new policyholders.

On the other hand, if you're going to have a renewal, you can choose to not adapt until April 1st, 2022 since this is the date the FEMA aims to have the new program take full effect on all flood insurance policyholders.

For now, we wait for updates with the coverages, but this is just one of the things that really won't change with the Risk Rating 2.0. If you have any questions on coverages in flood insurance, your flood risk fingerprint, or anything at all about floods and flood insurance, reach out to us by clicking below.

Remember, we have an educational background in flood mitigation which lets us help you understand flood risks, your flood insurance, and mitigating your property long-term.