Wading Through Coverage Differences in Expanding Private Flood Insurance

By | April 24, 2019

It has been a long-held insurance axiom that flood is not considered an insurable peril due to its potentially catastrophic nature. Here is what the report, “Affordability of National Flood Insurance Program Premiums: Report 1” (National Research Council, 2015) says about flood insurance: “Flood insurance was offered by private insurers between 1895 and 1927, but losses incurred from the 1927 Mississippi River floods and additional flood losses in 1928 led insurers to stop offering flood policies.”

The matter of providing flood insurance wouldn’t be mandated until the National Flood Insurance Act of 1968 created the National Flood Insurance Program (NFIP). Since then, few private insurers have dipped their feet into the flood waters, continuing to state that flood is so potentially catastrophic an exposure that they consider it uninsurable.

These days, more and more private insurers are wading into the waters. Some insurers have actually dived in to become private flood insurers. This exposure is no longer considered uninsurable. To be more accurate, it’s actually considered misunderstood by many in the industry and many more consumers. Until flood becomes a routinely covered loss exposure, many customers will continue to have policies written by the NFIP.

Because there are consumers that have NFIP policies covering their risk of flood loss, it would be good to know some of the key differences between the NFIP policy and the ISO HO-3 policy. Of course, look at the actual policies that you’re dealing with because (as we all know) different insurers will make different changes to policies.

Both the ISO HO-03 and the NFIP Standard Flood Insurance Policy (SFIP) provide coverage for property removed to protect it from loss or damage. Let’s compare how they do it.

HO-3 Property Removed

We insure covered property against direct loss from any cause while being removed from a premises endangered by a Peril Insured Against and for no more than 30 days while removed.

This coverage does not change the limit of liability that applies to the property being removed.

SFIP Property Removed to Safety

We will pay up to $1,000 for the reasonable expenses you incur to move insured property to a place other than the described location that contains the property in order to protect it from flood or the imminent danger of flood.

Reasonable expenses include the value of work, at the federal minimum wage, you or a member of your household perform.

If you move insured property to a location other than the described location that contains the property, in order to protect it from flood or the imminent danger of flood, we will cover such property while at that location for a period of 45 consecutive days from the date you begin to move it there. The personal property that is moved must be placed in a fully enclosed building or otherwise reasonably protected from the elements.

Any property removed, including a movable home, described in (the policy) must be placed above ground level or outside of the special flood hazard area.

This coverage does not increase the Coverage A or Coverage B limit of liability.


The differences between these two are vast. The first item you must notice is that the HO-3 provides coverage for the property while being moved, not just at the final location. The SFIP only provides coverage once the property arrives at another location. Consider all that could go wrong while moving personal property from the dwelling to another location. It’s possible that it could be damaged en route because when you’re packing a vehicle in a hurry, sometimes you aren’t as careful as you ought to be.

Another difference includes the requirement in the SFIP that the property be stored in a “fully enclosed building or otherwise reasonably protected from the elements.” The HO-3 doesn’t specify where the property must be. It simply tells us that the property must be removed to protect it. The SFIP requirement means that if the insured takes their property out of their house to protect it, they have to find a building to put it in.

Because the policy reads, “or otherwise reasonably protected from the elements,” we might get away with the interpretation that leaving the property in a vehicle and parking that vehicle in a fully enclosed garage would be enough. On the other hand, leaving the property in a vehicle and parking that vehicle under a carport might not be good enough. Does that mean that parking a vehicle in a parking garage that’s not fully enclosed is excluded?

The SFIP only provides coverage for one peril – flood. The property removed coverage on the HO-3 gives us coverage for direct physical damage to property. This means that the HO-3 expands coverage when the insured makes the attempt to protect their property. The SFIP provides coverage at a new location, but that’s it.

These aren’t all of the differences, of course, but they illustrate that these policies are different, with different requirements and different coverage details. Our job is to make sure that we’re providing customers with the coverage that they need and that they understand the coverage (especially the coverage gaps) that come along with the policies that they get.

This article originally appeared in Insurance Journal Magazine.

Topics Carriers Auto Flood Property

About Patrick Wraight

Patrick Wraight, CIC, CRM, AU, is director of Insurance Journal's Academy of Insurance. He can be reached at pwraight@ijacademy.com.

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