Flood policy coverage and limits
Domain 2: Flood Policy Coverage and Limits
This domain tests what the SFIP insures, what it excludes, and how limits apply. Questions often turn on the definition of flood, the split between building and contents, form-specific limits, Increased Cost of Compliance (ICC), and exclusions that insureds commonly dispute.
Core rules
- The SFIP insures direct physical loss by or from flood. Flood includes overflow of inland or tidal waters, unusual and rapid accumulation of surface waters, mudflow, and collapse or subsidence of land along a shore caused by erosion or wave action. It generally requires inundation of two or more acres of normally dry land or two or more properties, one of which is the insured's.
- Dwelling Form limits: $250,000 building and $100,000 contents for a 1-4 family residential building. General Property Form: $500,000 building and $500,000 contents. RCBAP: building limit is the lesser of replacement cost or $250,000 times the number of units; contents aggregate is $100,000.
- ICC adds up to $30,000 per building for code-compliance costs after a flood loss when the building is substantially or repetitively damaged.
- Common exclusions: additional living expenses, business interruption, sewer backup unless caused by flood, most property outside the building, vehicles, currency, precious metals, animals, and limited basement contents.
Worked example
A Dwelling Form policy has $250,000 building and $100,000 contents. Flood causes $300,000 of building damage and $40,000 of contents damage. Building payment is capped at the $250,000 limit, less the deductible; contents pay $40,000 less the deductible. ICC is not automatically added; it requires a substantial-damage or repetitive-loss determination.
Traps
Do not pay additional living expenses or business interruption under the SFIP. Do not treat sewer backup as flood unless the flood itself caused it. Do not add ICC to every loss. Do not assume contents in a basement are fully covered.