Flood insurance and condo associations: Dispelling 5 myths

By Michelle Newton

Flood insurance might not be on the minds of your condominium association clients, but here is why it should be.

The 2024 hurricane season rapidly kicked into gear with the arrival of Hurricane Beryl, which became the first Category 4 hurricane on record for June and strengthened into the earliest Category 5 on record in July. The storm was followed by Hurricane Debby in August, and activity has remained fairly quiet. While there may be lulls between storms, The Weather Channel notes that these lulls are “usually followed by very active periods” and “the large majority of season activity still lies ahead.”

As the number and intensity of hurricanes increases and extreme rain events become more frequent, the risk of flood disasters escalates for many of the condominium community associations in the United States.

Even as this risk continues to grow, condominium associations may be unaware that they need flood insurance or have misconceptions about what it covers. Insurance agents should make it a point to discuss the importance of this risk transfer solution with clients and debunk any myths they may believe about it.

Myth #1: Flood insurance is only needed if communities are in a flood zone

Condominium associations may mistakenly believe that flood insurance is not necessary if their property is not located in a flood zone. Agents should help clients move away from the “flood zone versus no flood zone” mindset when it comes to making decisions about purchasing this insurance. Condominium associations should be aware that, according to the Federal Emergency Management Agency, “about 25% of all flood insurance claims come from areas with low-to-moderate flood risk,” which indicates that properties don’t have to be located in a high-risk zone to be impacted. This is especially true in coastal states such as Florida. Agents should help clients located in these states understand that every zone is a flood zone.

Myth #2: Only severe storm impact will cause damage

Flooding, the most common and costly natural hazard in the United States, is a major risk exposure for condominium associations. The Department of Homeland Security states that “90% of natural disasters within the United States involve flooding.”

While clients might believe that only direct hits from hurricanes and tropical storms will cause flooding to their properties, that is not the case. Damage can result from heavy rainfall, snowmelt, storm surges and overflowing rivers. Agents should make clients aware that “just one inch of floodwater can cause up to $25,000 in damage,” according to FEMA.

Myth #3: Flood insurance can be purchased at any time

It is essential for agents to encourage their clients to be proactive in getting flood insurance. Many clients assume that if a storm is coming, they can quickly get coverage. The reality is that in most cases, flood insurance policies, including National Flood Insurance Program policies, take effect 30 days after the policy is purchased.

Agents should help clients understand that damage from a flood event in progress during the 30-day waiting period is excluded from coverage. They will not want to wait until a flooding event strikes to realize their properties are not covered.

Myth #4: Associations can get properties repaired easily after a flood event

After a storm hits, agents know that general contractors, engineers and remediation companies are often in short supply. With heightened post-storm demand for these professionals, it can be difficult for those affected to find qualified people to begin work on their properties, and wait times often result in additional and unexpected expenses.

Agents should stress to clients the importance of having a post-storm game plan. That game plan should include a go-to team of repair and recovery professionals who are immediately available after a flood event to assess damage and who can quickly move forward with restoration and recovery.

Condominium associations that don’t have a team of repair professionals in place could, out of necessity, turn to less experienced general contractors and remediation professionals who may not get the job done correctly. They could even face price hikes for the services of these professionals.

Agents must help their condominium association clients understand the importance of flood insurance and debunk the associated myths. Clients who understand that flood insurance is an essential component of a comprehensive risk management plan will make the wise decision to purchase this critical insurance. That decision helps them protect their associations from the financial consequences of flooding events, ensures a faster recovery when disaster strikes and protects the value of their properties.