Andrew, Katrina, Harvey, Irma, Sandy all are beautiful names but evokes dreadful memories of the devastating experience of complete destruction and turmoil by nature’s fury. These are names of Hurricane that hit the American coast and made billions of dollars of property losses to the citizens. USA enacted an insurance bill way back in 1968, Federal National Flood Insurance Act (NFIA) to provide coverage for flooding and storm surge losses. The national insurance coverage program under NFIA is popularly known as Federal Flood Insurance Program (FFIP).
At the outset, a claim processor must check the exclusions explicit and implicit in the policy under FFIP. After the enactment of NFIA in 1968 and the national rollout of FFIP, a general or standard home insurance or property insurance policy does not cover any damages caused by flooding, surface water or storm surge.The claim processor must go through the statements given by the insured party and vet by attorneys to identify the type of damage to determine the coverage of the claim under the policy. If facts of the claim cannot be determined, the claim needs to be moved to a ‘seek clarification’ and request additional information from the insured.
The valuation report by the insurance adjuster or valuer after listing and making necessary inspections of the damaged property is to be used as the underlying document for claim processing. This has to be cross vetted with deductibles and other special coverage provided in the covered policy. Exclusions must be deducted from the claim value to arrive at the net value of the claim.
A basic FFIP policy coverage is up to in damages to the property and up to in damage to the contents, if no additional deductibles are there, these amounts set the upper limits of the claim settlement.The claim processor must exclude all the deductibles from the net value of the claim to arrive at the net releasable amount under the policy.
A deductible is the amount of loss incurred by the insured himself and cannot be recovered within the damage claim under the policy. Most of the FFIP policy has two types of deductibles hurricane deductibles and windstorm deductibles. These types of deductibles are often taken as a percentage of the insured value of the property, for e.g., if the insured value of the property is and has a 5 percent hurricane deductible, the first of the claim must be paid out of the policyholder’s pocket.
It must be understood that a claim under the FFIP can only be accepted for the damages occurring during the specified periods from the trigger of the Hurricane event. The trigger is when the National Weather Service (NWS) names a storm, declares a hurricane watch or warning or defines the hurricane’s intensity. The claim of damage must only be accepted for the period occurring within 24 hours before the storm is named or a hurricane makes landfall up to as long as 72 hours after the hurricane is downgraded to a lesser storm or a hurricane watch canceled. The damages occurring outside the specified period is not normally covered under a FFIP policy but can be covered under a standard storm surge policy. A deep perusal of the insurance adjuster report must reveal the time of the damage and the eligibility of coverage must be assessed by the claim processor based on his report.