Interpreting a Flood Insurance Policy: Unit 5

November 12, 2012 by

Three Important Facts about a Flood Policy

 

Important Facts
 A Standard Flood Insurance Policy is a single-peril (flood) policy that pays for direct physical damage to property up to the replacement cost or Actual Cash Value (ACV) of the actual damages or the policy limit of liability, whichever is less.

  1. Contents coverage must be purchased separately.
  2. It is not a valued policy. A valued policy pays the limit of liability in the event of a total loss. Example: A home is totally destroyed by a fire and it cost $150,000 to rebuild. If the homeowner’s policy is a valued policy with a $200,000 limit of liability on the building, they would receive $200,000. Flood insurance pays just the replacement cost or ACV of actual damages, up to the policy limit.
  3. It is not a guaranteed replacement cost policy. A guaranteed replacement cost policy pays the cost to rebuild the home regardless of the limit of liability. Example: The home is totally destroyed by a fire and it costs $200,000 to rebuild. If the homeowner’s policy is a guaranteed replacement cost policy with a $150,000 limit of liability on the building, the homeowner would receive $200,000. Flood insurance does not pay more than the policy limit.

  [mtouchquiz 13]

Filed Under: Interpreting a Flood Insurance Policy