Recording-2025-05-21T19:42:54.260Z

National Flood Insurance Program (NFIP)

• Administered by FEMA (Federal Emergency Management Agency).
• Created in 1968 to provide federally subsidized flood insurance.
• Mandatory Purchase:
  • Homes/buildings in high-risk flood areas with mortgages from federally regulated/insured lenders require flood insurance.
  • If not purchased within 45 days of notification, the lender can force-place coverage.
  • Federal agencies are prohibited from providing financial assistance to flood victims who didn't have the required insurance.
• High-Risk Areas:
  • Defined as areas with at least a one in four chance of flooding during a 30-year mortgage.
• Private Insurers & Write Your Own (WYO) Program:
  • Flood policies are sold by private insurers through the NFIP's WYO program.
  • Private insurers issue policies on behalf of NFIP and are 100% reinsured by the government, meaning no risk of loss for the insurer.
  • Private carriers service the policies and retain part of the premium for costs, commissions and profit.
• Agents and Brokers:
  • Any licensed agent/broker can obtain an NFIP policy.
  • However, they have no binding authority.
  • Producers must complete pre-licensing training or a 3-hour continuing education course before their first NFIP application.
• Premium Rates:
  • Set nationally by the NFIP.
• Flood Insurance Rate Map (FIRM):
  • New policies are rated based on FIRMs.
  • Policies written before FIRM establishment exist as well.
• Pre-FIRM Buildings:
  • Construction or substantial improvement occurred on or before 12/31/1974, or before the initial FIRM effective date.
• Post-FIRM Buildings:
  • Construction or substantial improvement occurred after 12/31/1974, or on or after the initial FIRM effective date, whichever is later.
• Community Eligibility:
  • Requires enforcement of land control measures to guide development away from flood-prone areas.
  • Agreement to adopt land use and flood control measures to prohibit new construction in areas with >1% annual flood chance.
  • Failure to apply results in no federal assistance during floods.
  • Flood insurance is mandatory for federal disaster relief benefits.
• Eligible Structures:
  • Must have two or more outside rigid walls and a fully secured roof affixed to a permanent site.
  • Must resist flotation, collapse, and lateral movement.
  • At least 51% of the building's actual cash value (ACV) must be above ground, unless the lowest level is at/above the base flood elevation (BFE).
  • Detached garages are covered if not used for residential/business/farming.
  • Manufactured homes/mobile homes/travel trailers w/o wheels (if affixed to a permanent foundation & anchored in SFHA).
  • Silos, grain storage, cisterns, buildings over water, buildings under construction, and repetitive loss properties.
• Emergency Program:
  • Available while community approval is pending after agreeing to adopt FEMA land use controls.
  • Provides coverage up to special limits.
  • Premium rates are federally subsidized and the same in all locations.
  • Applies to all property types (commercial, residential, industrial, agricultural, public).
• Regular Program:
  • Available when a detailed flood risk study is completed or waived by FEMA, and the community adopts floodplain management ordinances.
  • Offers increased coverage amounts.
  • Coverage begins at 12:01 AM the day after application.
• Flood Policy Coverage Limits:
  • Emergency Program:
    • Single Family: Building 35,000, Contents 10,000
    • Other Residential: Building 100,000, Contents 100,000
    • Small Business: Building 100,000, Contents 100,000
    • Other Non-Residential : Building 100,000, Contents 100,000
  • Regular Program:
    • Single Family: Building 250,000, Contents 100,000
    • Other Residential: Building 250,000, Contents 100,000
    • Small Business: Building 500,000, Contents 500,000
    • Other Non-Residential: Building 500,000, Contents 500,000
  • Max coverage for renters contents: 100,000
• Deductibles:
  • Emergency Program: 2,000 for both building/contents.
  • Regular Program: 1,000 - 10,000 for building/contents.
  • Deductibles apply separately; potential total of 4,000 for one claim.
• Definition of Flood:
  • A general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties, at least one of which is your property,from:
    • Overflow of inland or tidal waters
    • Unusual and rapid accumulation or runoff of surface waters
    • Mudflow
    • Collapse/subsidence of land along a shore due to erosion/undermining by waves or currents.
    • Covers tsunamis and storm surges.
• Covered Water Sources:
  • Inland or tidal waters (rivers, canals, lakes, coastal bays) that overflow.
  • Excess runoff that fails to drain.
• Mudflow Coverage:
  • Resulting from floods or coastal erosion.
• General Condition Requirement:
  • Flood must be a general condition in the area, not isolated.
  • Example: Sewer backup or broken sump pump is not a flood.
• Policy Exclusions:
  • Flooding within the insured's control.
• Building & Contents Coverages:
  • Separate, each requiring a deductible.
• Flood Forms:
  • Dwelling Policy Form: For homeowners, renters, condo owners.
  • General Policy Form: For non-residential buildings (apartments, businesses).
• Building Coverage Settlement:
  • ACV (Actual Cash Value) for most losses, except…
  • Replacement Cost for single-family, principal residence, if insured for at least 80% of replacement cost or the maximum coverage available.
  • If replacement cost > 250,000, coinsurance penalty is waived if program maximum (250,000) is maintained.
• Excluded Property:
  • Landscape (lawns, trees, shrubs, plants).
  • Outdoor swimming pools, fences, water structures.
  • Walks, driveways, and paved surfaces outside the building.
  • Certain property in basements (finished walls, floors, ceilings).
• Contents Coverage:
  • Household and personal property incidental to occupying the dwelling.
  • Must be inside a fully enclosed/sheltered building on the premises - No off-premises extension.
  • Covered items: AC units, portable dishwashers, carpeting on finished floors, washers/dryers.
  • Maximum: 100,000 for regular program residences and renters' contents.
• Increased Cost of Compliance (ICC):
  • Up to 30,000 to help repair flood-damaged buildings to meet floodplain requirements in Special Flood Hazard Areas (SFHA).
  • Covers costs to elevate, flood-proof, relocate, or demolish the building.
• Waiting Period:
  • 30-day waiting period after application/premium payment.
  • Waived if flood insurance is purchased in connection with a loan.
  • No binders during the waiting period.
• Cancellation:
  • 20-day written notice for cancellation due to non-payment.
• Transferability:
  • Freely transferable to a new owner without a waiting period or insurer permission.
• Claim Limitations:
  * 60 day deadline for insured to submit proof of loss for a claim.
  * One year statute of limitations for policyholder to file suit in response to a claim denial.
• Exclusions:
  • Business income and extra expense losses.
  • War, nuclear reaction.
  • Building code enforcement.
  • Insured's neglect to protect/preserve property.
  • Power/heating/cooling failure (unless due to flood damage to equipment on premises).
  • Losses covered by homeowner/dwelling policies.
• Agent/Broker Requirements:
  • Must complete pre-licensing training (new licensees) or 3-hour continuing education (current licensees).
  • No binding authority
• Commercial Flood Coverage:
  • Mirrors personal flood coverage but with higher limits (500,000 for both building and contents).
  • No business income or extra expense coverage.
• Residential Condominium Building Association Policy (RCBAP):
  • Issued by FEMA for residential condominiums, purchased only by the condominium owners association, not a personal policy.
  • Eligibility: At least 75% of the floor area must be for residential purposes.
  • Maximum coverage: The lesser of 100% of the replacement cost or (total units in building * 250,000).

Earthquake Insurance

• Optional Endorsement:
  • Usually available as an optional endorsement to homeowner's/dwelling policies (personal) or commercial property insurance (commercial).
• Premium Cost Factors:
  • Distance from major earthquake fault lines.
  • Age of the structure.
  • Type of construction.
• Coverage:
  • Covers damage from earthquake, including land shock and tremors before/after volcanic eruption.
• Aftershocks:
  • Multiple earthquakes within a specific timeframe of volcanic action (aftershocks) are considered a single occurrence.
    • Personal Lines: Tremors within 72 hours are a single volcanic action.
    • Commercial Lines: Endorsements consider tremors within 168 hours.
• Deductible:
  • Special deductible as a percentage of Coverage A or C (whichever is greater).
  • Ranges from 2% to 20%.
• Exclusions:
  • Related flood damage, even if caused/aggravated by an earthquake.

Windstorm Insurance

• Coverage Variations:
  • Standard homeowner policies typically provide windstorm coverage, But, in high-risk areas windstorm peril may be specifically excluded from standard policies and require purchasing a separate policy or endorsement.
  • Insurers maintain lists of areas (by ZIP code) requiring separate windstorm coverage.
  • Most windstorm coverage is purchased in Texas and Florida.
• Deductibles:
  • Usually between 1-10% of the dwelling coverage amount.
• Definition of Windstorm:
  • Storm characterized by heavy or high winds but little/no precipitation.
  • Includes loss by hail.
  • Winds usually exceeding 35 mph.
  • Includes tornadoes, hurricanes, and cyclones.

Personal Articles Floaters (PAFs)

• Coverage Type:
  • Open perils basis.
  • Covers insured property anywhere in the world.
• Loss Settlement:
  • Limited to ACV (actual cash value) or cost to repair/replace, whichever is lower.
• Stated Value Exception:
  • If written on a stated value basis, depreciation is ignored. Value placed on the item at coverage initiation is paid.
  • Used for fine art.
• Function:
  * Offers the same coverage as a homeowner’s policy scheduled personal property endorsement.
  * Provides options for higher policy limits and offers worldwide coverage.
• Scheduling:
  • Items are individually appraised and specifically listed in the declarations.
  • A separate premium is listed.
  • Once scheduled, no deductible applies, and the limit no longer reduces the Coverage C limit of liability..
• Common PAF Classes:
  • Furs
  • Jewelry
  • Fine arts
  • Postage stamps (individual valuable stamps or entire collections)
  • Cameras
  • Silverware
  • Rare coins (individual coins or collections)
  • Golfers Equipment
  • Musical Instruments
• Personal Property Floater:
  • Increases coverage for unscheduled personal property.
  • Establishes a value for the property as a whole.
  • Each piece isn't appraised/listed in the declarations.
• Personal Effects Floater (PEF):
  • Ensures policyholder's personal property taken on trips/vacations.
  • Covers property everywhere except at the insured's home.
• Examples:
  • Coverage for custom-made golf clubs appraised at 10,000, handcrafted furniture, expensive wardrobe for travel, by purchasing PAF for golf clubs, furniture and PEF for his clothes while traveling.

Umbrella and Excess Liability Policies

• Purpose:
  • Provides additional liability coverage when base policy limits are insufficient.
• Types:
  • Stand-Alone: Separate terms/conditions from underlying policies.
  • Follow Form: Incorporates terms/conditions of underlying policies. (becoming rare).
• Umbrella Liability Policy:
  • Excess liability, providing a large extra coverage amount and broad liability coverage for both general and auto liability.
  • Purchased separately from basic liability contracts (general/auto).
• Target Economic Groups:
  • Wealthy to upper-middle-class individuals with sizable assets (>$300,000).
  • Self-employed and business owners/principals.
• Cost:
  • Relatively inexpensive (e.g., under a few hundred dollars annually for an extra million dollars of personal liability coverage).
• Requirement:
  • Must be added as excess coverage layered up other personal liability coverages and cannot be purchased alone.
• Underlying Coverage:
  • Rests on underlying coverage from Personal Auto Policy (PAP) and homeowner policy (each typically 500,000 for single limits or 250,000/500,000/1,000,000 for split limits.
  • Umbrella amount (minimum 1,000,000) pays only after underlying primary insurance is exhausted.
  • Exception: Umbrella will pay if the umbrella, which is written in broader language than the underlying primary insurance, covers the loss which erases, but the underlying coverage does not.
  • Watercraft insurance if the insured owns the boat or a yacht.
• Self-Insured Retention (SIR):
  • The SIR is similar to a deductible that may apply on other types of insurance.
  • It is the amount that the insured will be responsible for before the Umbrella policy will respond to loss.
    • Only Required to be paid in instances when the underlying coverages do not apply to the claim, but the umbrella coverage does due to its broader coverage language.
    • The SIR may range from several hundred or thousands of dollars.
• Defense Costs:
  • Liability coverage includes legal representation if a third party sues, whether the insured is liable or not. Insurer must defend the insured in court.
• Excess Policies:
  • Provide greater coverage limits than underlying coverages.
  • Expanded coverage available when first line of insurance isn't large enough.
  • Closes coverage gaps and provides additional coverage layer.
• Excess vs Umbrella:
  • Excess provides additional limits without affecting underlying policies.
  • Umbrella is broader and can cover additional situations.
• Follow Form Excess Policy
  • Designed to give the same conditions and terms of coverage as the policies which underlie it.
  • Gives precedence to the underlying coverage policy and its terms and conditions when the excess and primary coverages are different and conflict with each other. These follow forms are rare today as usually it is the broader excess umbrella that takes precedence in the event of conflicting coverages or terms.

Boat Owners' and Yacht Policies

• Personal watercraft
  • Most policies are similar in structure.
  • Focus is the liability coverages.
  • Section of watercraft typically include personal liability for body injury and property damage.
  • Insuring agreement promise to pay for the insured's legally obligated act causing loss that erases out of operation, maintenance or use of the watercraft.
  • The policy also pays liability created from use of an unknown watercraft.
  • The policy comes with both a duty to defend and indemnify.
• Medical payments:
  • The medical loss must be an accident that erases out of the covered property or non owned boat causing body injury.
  • It is no fault and goodwill coverage and pays regardless of the insured's liability.
• Coverages included:
  • Removal of sunken property resulted in cost for raising, removing, destroying a covered property.
  • Legal expenses to defend a suit and reimburse the insured per diem for missing work.
• Exclusions:
  • Public delivery
  • Illegal transportation or trade, racing, demolition or stunting
  • Intentional act
  • non owned boats
  • property rented, hired transported or used in business
  • Exclusion only apply to medical payments, work compensation and trespassers.
• Boat Owner's Insurance (Outboard Motor and Boat Form):
  • Form of inland marine insurance.
  • Sold as a package covering property damage, liability for BI/PD, medical payments, and uninsured boat owners.
• Personal Watercraft Policy:
  • Most common type.
  • Covers what homeowner's doesn't, with higher limits.
  • Loss must occur within the policy period on land or coastal waters, tributaries, inland lakes, and rivers in USA/Canada.
• Boat Owner's Policy:
  • Provides insurance against physical damage to relatively small boats used for non-commercial purposes.
  • Fills coverage gap for craft otherwise insured under homeowner's (limits coverage for physical damage to 1,500).
  • Covers each boat, motor, and trailer listed in the declarations, plus boat/motor equipment on schedule.
  • Losses covered based on replacement cost up to policy limits.
  • Extends automatically to newly acquired crafts for 30 days (max $5,000 per boat, $1,000 for motor/trailer).
  • Covers watercraft on an open peril basis, excluding wear/tear, negligent maintenance, and weather conditions.
  • Excludes losses when used for commerce/rent/loan to someone else.
  • Excludes damage from collision with natural formations (rocks, stumps).
• Liability:
  • Provides up to $1,000 of liability insurance for damage to the property of others. Nothing for bodily injury.
  • Insured relies on homeowner's for liability while operating an owned watercraft:
    • Outboard motor up to 25 horsepower.
    • Inboard motor up to 50 horsepower.
    • Sailboat up to 26 feet.
  • Companies offer liability coverages (operations, passenger, flotilla).
  • Watercraft policy can provide a full range of coverages whatever the size or configuration.
• Watercraft Coverage Form:
  • Comprehensive policy providing liability insurance, medical payments, and physical damage.
  • Covers inboard and outboard watercraft.
  • Excludes exposures from commercial activity.
  • Excludes personal watercraft (jet skis) but can be added with an endorsement.
• Yacht Insurance:
  • Available to insure yachts, sailboats, and import motorboats used solely for private pleasure.
  • Property coverage is on an open perils basis.
  • Meets the needs of those insured with large vessels.
  • Can be used to cover smaller vessels at the insured's option
  • Coverages:
    • Vessel (hull).
    • Liability.
    • Medical payments.
    • Workers' compensation (vessel's crew).
    • Boat trailer.
    • Land transportation damage.
    • Protection and indemnity.
• **Uninsured Private Pleasure Watercraft Coverage: Provides coverage for bodily injury or property damage to the insured sustains as the result of being hit by the operator of an uninsured watercraft.

Mobile and/or Manufactured Homes Policy

• Earlier coverages treated the mobile home like a car and only offered actual cash value replacement coverage.
• With the advent of the modern modular home and its popularity, policies began to cover more types of construction and the concept of mobile and now offer replacement cost coverage subject to an 80% coinsurance clause.
• Mobile home differs from recreational vehicle and must be connected to water and utilities for year-round living.
• Mobile home defined as a trailer used as permanent building, normally connected to utilities or designed without a permanent foundation.
• Mobile home policy attached to homes (h o two or h o three) as endorsement but can be written as a policy by itself.
  • Becomes mobile homeowner's policy and has same coverages (Section I and Section II) as homeowner's policy.
    • Accept that coverage C, personal property is 40% of coverage A amount instead of 50% coverage.
• Special property removed clause.
  • If mobile home is in danger of damage or loss caused by covered peril, policy will pay up to $500, no deductible to remove personal property to avoid damage
• Ordinance or law exclusion does not apply since mobile home can be moved Coverage A pays loss on a replacement cost basis, includes carpeting and appliances, subject to 80% coinsurance requirement.
• Awnings, outdoor antennas and outdoor equipment, settled on ACV (actual cash value) basis

Recreational Vehicles (RVs)

• RV is a trailer/motor vehicle housing living quarters designed for RV owner needs.
• Diverse types include motorhomes, caravans, camper vans, pop-up campers, dirt bikes, ATVs, dune buggies, golf carts, snowmobiles, and fifth-wheel trailers.
• RV liability insurance protects RV owner when loss erases from operation/use/maintenance of RV, causing BI/PD to another.
  • Includes medical payments on a no-fault basis.
  • Most states require liability coverage.
  • Operates like personal auto policy (bodily injury limits per person/accident, property damage per accident).
• Specific policies cover loss/damage to various RVs:
  • RV and Motorhome Insurance (can vary in size/accommodations).
    • Covers direct/accidental damage or loss like collision, lightening, wind, landslides, vandalism, tree damage, theft.
    • Extending the coverages provided by the PAP to these vehicles.
  • Fifth Wheel Insurance (for trailers hitched to RV or pickup).

Pet Insurance

• Fastest growing insurance type with evolving regulations.
• Modeled laws developed by NAIC (National Association of Insurance Commissioners) for state implementation.
• Definitions:
  • Chronic Condition: Can be treated/managed, but not cured.
  • Congenital Anomaly/Disorder: Present from birth, inherited/environmental, causing illness/disease.
  • Hereditary Disorder: Genetically transmitted from parent to offspring, causing illness/disease.
  • Pet Insurance: Covers veterinary expenses.
  • Pre-existing Condition: Medical advice/treatment/signs/symptoms prior to policy effective date or during waiting period.
  • Veterinarian: Licensed to practice veterinary medicine.
  • Veterinary Expenses: Costs for medical advice, diagnosis, care, treatment by a veterinarian, including prescription drugs.
  • Waiting/Affiliation Period: Time before coverage begins.
• Basic Coverage:
  • Covers veterinary expenses (advice, diagnosis, care, treatment, prescription drugs).
• Disclosures (Exclusions):
  • Must disclose if policy excludes coverage for: pre-existing conditions, hereditary disorders, congenital anomalies, or chronic conditions.
  • If any of the above terms are used, the policy must use the defined term and include the definition in the policy and on the insurer's website
  • Must provide the statement, “Other Exclusions May Apply” and state to refer to the exclusion section of the policy
• Coverage Limits:
  • Must disclose policy provisions that limit coverage (waiting periods, deductibles, coinsurance, annual/lifetime limits).
• **Insurer is required to disclose whether the insurer reduces coverage or increase premiums based on the insured's claim history.
• Payment formula Disclosure: Must be given
• Benefit Schedules, If applicable, must be disclosed in the policy and disclose all schedules used by the insurer under its pet insurance policies through a link on the main page of the insurer's website
• Payments based on provider charges Must be disclosed through a link on the main page of the insurer's website by Including a usual and customary fee limitation provision which describes the insurers basis for determining usual and customary fees
• Insurer disclosure of important policy provisions document: An insurer must create a summary of all policy provisions and disclosures, the insurer must post the document through a link on the main page of the insurer's website.
• **Free