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Julie (00:05): 

Hey, Tyler Banks. How are you?

Tyler (00:07): 

Good morning, Julie. Good to see you.

Julie (00:09)

Good to see you too. Okay, so we are going to talk about the age old question today about flood or water damage. That is the question. So I don't, I don't know about you, but this is a question that I've been getting for literally decades, and I'm probably showing my age right now.

But, this is something that we talk about all the time because people are always questioning if it's gonna be covered at the homeowner's policy or if it's gonna be flood? And what causes a - what determines a flood, trigger versus a water damage trigger. 

Tyler (00:40)

And Julie, the other question, flood or no flood? I mean, how many times are clients asking us, do I need flood? Am I in a flood zone? Do I, you know, how much flood coverage do I need for my home?

Julie: (00:52)

You know what, Tyler, that's a perfect segue for the first piece of trivia I want to ask you. So, as we all know, everyone is in a flood zone, right? It just depends if you're in a high-risk flood zone or if you're in a low-risk flood zone. So my question to you is what percentage of flood claims happens outside?

The major flood zones, the A zone and the V zone. Do you

Tyler (01:15)

A trivia question. I love trivia questions. Um, I think it's about 40%. 40% of floods happen outside of a flood zone, so most people think, well, if I'm not in a flood zone, I don't need flood insurance. But in actuality, they need, you know, flood insurance because there's a very high percentage that they could be impacted by a flood.

Julie (01:34)

Yep. So, and that what, not only are they impacted by a flood. But also, they don't have the flood insurance, right? Because if it's not lender required, then they aren't required to purchase it—if it's not in a major flood zone. So a lot of these people, those 40% people, may not even have flood insurance. So it's a first dollar paid out out of their pocket, right?

Tyler (01:55)

People need to be aware of their exposure to flood. And if their policy is insufficient, it warrants a discussion.

Julie (02:04)

Well, and the thing is, most people think that flood insurance should be, um, purchased in the coastal areas, right? In Florida is the main one, right? But if you think about it, my next piece of trivia.

Do we? Do you have an idea of what are the top three most significant flood events that the NFIP? The National Flood Insurance Program has deemed to be the biggest payouts?

Tyler (02:25)

I think, uh, obviously the largest one was in, um, new Orleans, right, Katrina? Um, and I think that that lives in a lot of people's memories because you could visualize the Superdome and the people going into the Superdome and, you know, having the Superdome, you know, roof kind of  um, fly off, and the recovery efforts afterwards.

So, um, that one is by far the, the, the largest one, um, in recent memory. Um, and I, and, um, you could probably share the other two with us as well.

Julie (02:53)

Yep. The first, the, the next one is Super Storm Sandy, right? Um, in 2012. And then the last one was hurricane, um, Harvey, which was in 2017.

The interesting thing is none of these happened in Florida. They were in Louisiana. They were Texas, and they were in the Northeast. So the people that think that they need insurance, flood insurance are the ones that are on the coast, right. That are, um, you know, in Florida or on the east coast of the southeast like Georgia, North Carolina.

None of them's happened there. Those are the largest storms and none of the, none of them happened there. So that's the whole interesting fact about flood insurance, that no matter where you are, you really, truly need it. You could be in the mountains of North Carolina and still need flood insurance, right.

So, but that's, flood insurance, as you're going to tell us, is very different than what water damage is. So flood insurance, you need a separate policy. Water damage, it's a homeowner's policy. So there's a lot of claims when it comes to water damage as well.

Tyler (03:53):

Yeah, the way I was taught about flood versus water damage is flood. Is water coming up and water damage is water coming down.

Right. Uh, I think you can share with us some of the top reasons for a water loss inside of a home. You know, what, what are, what are some, like the three top things that, uh, that a client would have a water loss.

Julie (04:34)

I mean, honestly, I would say like pipe bursting.

Tyler (04:36)

Mm-hmm.

Julie (04:37)

It could be anything from, honestly, a pipe bursting to appliances, a, you know, a refrigerator, ice maker leaking. It could be a hot water, you know, heater leaking. It could be a roof damage coming through the ceiling. Um, it kind of all depends, but there's so many different scenarios that, um, that would justify water damage and honestly, they. This stuff could happen when you're away on, on vacation.

Tyler (05:06)

I think you talked about, you know, whether you've had a, a water claim or I've had a water claim and, uh, was yes to both. Right. I mean, Situation, it was self-inflicted, meaning I was my own plumber because I thought I could install a faucet on my own. And I overt tightened, you know, one of the, you know, one of the gaskets and unfortunately started leaking hot water.

And I was out of town for three days and I was living in a town home at the time. And, and the, the water damage went through three floors through my garage and water was pouring outta my garage. So there's nothing more disruptive than coming home after three days and having, um, you know, restoration company there to lift up your carpets with the big fans taking out the drywall.

Um, and, you know, the, there's, there are opportunities now to reduce that total exposure. For those water losses. You know, mine happened about 20 years ago and 20 years ago they didn't have the same technology that we have now.

Julie (06:09)

I have like a water detection unit right in my house. I'm sure you do too. Um, and honestly, the insurance companies will give discounts for that stuff, so why wouldn't you? Right? I mean, that kind of stuff. If you're gonna get a discount year after year on your homeowner's insurance, why not?

Actually have that device. It's in the grand scheme of things, it's not that expensive to install.

Tyler (06:30)

Well, I would, I, I would actually say that it's actually mandatory now.

So, question for you. Wind-driven rain, Is that a flood, you know, exposure or is it a, you know, water loss?

Julie (06:40)

It's a water loss. It's a homeowner's claim because it's not rising now that that's the whole gray area, right? When there's a storm and there are tornadoes coming from hurricanes and there's like, you're right, sitting right on the water, what come? What, what is the gray area? Is it the storm surge that caused it or is it the rain?

Tyler (06:57)

Storm surge. Is storm surge flood? Is storm surge surge flood or is it, you know, a water loss.

Julie (07:03)

Storm surge is flood.

Seeping water in a basement. That seepage—that's flood. Anything. Flood is basically determined if it's two adjacent properties, and that there's, um, an excessive amount of water, right? So, but it has to be def a definition of a flood in order for it to be, considered and triggered on a flood policy. So let, let's talk about flood for a little bit here. So, on a flood policy, what are some of the restrictions that we see on an NFIP policy?

Tyler (07:26) So let, let's talk about flood for a little bit here. So, on a flood policy, what are some of the restrictions that we see on an NFIP policy?

Julie (07:35)

other structures.

Tyler (07:37)

Yeah,

Julie (07:38)

You know, you can't, you, you have to, you have to endorse that, or you have to get a, a separate policy on the restriction is if there's, um, uh, lack actual loss sustained. You know, if you have to go someplace else to live. Um, the limitations we talked about, the capped out limitations. I mean, you can have a, a multimillion-dollar house and an NFIP policy is only gonna give you $250,000 to replace that house, right? 

Tyler (07:59)

That’s right.

Julie (08:00)

There's limitations on sometimes equipment or subgrade levels of, of A home. Um, that's all stuff that, needs to be discussed with people to be able to actually educate them about what's covered and what's not.

Tyler (08:15)

So what that has, has fostered is the introduction of a private flood, you know, marketplace. And we're starting to see more options for a private flood. and we've seen a big appetite for carriers to kind of jump in and offer alternatives to an NFIP policy.

Julie (08:32)

And some, some excess flood policies. You can get additional coverages that the NFIP may not be able to offer on that policy. Right. And you can get up to whatever limit that the replacement cost of the home is. You don't have to, it's not. You know, you don't, it's not required that you have to have a certain amount.

You can kind of tailor it exactly what kind of coverage that you want. So if you have, a $5 million house and you only wanna buy $2 million worth of coverage, you can do that. Um, and you don't have to have to buy contents coverage along with that. So, there are options, especially for the high valued homes.

Tyler (09:03)

So you get the primary flood and then you can get excess flood that sits on top of that primary flood. You can get full coverage or you can just get a, a certain amount of. Coverage that you, you feel is warranted for your property. So if you've got a client

that has a basement and it's unfinished, is it gonna be covered or is it not gonna be covered under an NFIP policy? Right? We've got some, we've got some limitations there.

Julie (09:24)

The other thing too that honestly, that we've come across is sometimes with like the California fires. Something, um, that houses are, are burnt, right? So that's, there's a, it's a vacant piece of land, but all of a sudden torrential downpour. Um, and all of a sudden there are mudslides and there's flooding, um, due because there's, there's nothing to, to sustain and keep this water from, from rolling down a mountain, right?

So a lot of the floods actually come when. you know, there's been a wildfire and there's no vegetation to kind of soak up that water. So people that think that there's no flooding in, you know, uh, areas that aren't coastal, then that's just a misconception for sure.

Tyler (10:12)

That's right. So you, I mean, you take like a hurricane like hurricane Harvey, right? That that was a, a massive loss there in, in Texas, you know, it was a hurricane that just was very slow and had a lot of moisture and dumped a ton of rain. In a small, concentrated area for, um, a prolonged period of time.

Right? So you don't have to be next to a river, a stream, or even an ocean to experience a flood.

Julie (10:41)

You know, you, you make a good point. Look, so Superstorm Sandy, you mentioned it at, it affected new the Northeast, right? New York and New Jersey. It completely changed the entire landscape of the insurance industry, the insurance in the northeast region, like the insurance companies. After that, they started revamping how they, how they look at the northeast and how they.

Um, you know, think about rating and underwriting, um, just because of sup, Superstorm Sandy because it just sat there like for days and rained for days and days and days. So it can completely change the landscape of insurance.

Tyler (1117)

Let's go back a little bit to, to water losses in homes. Um, because a lot of times we get called and there is a, say, a small pinhole leak. That's, you know, happening behind a wall that they, you know, were, were not aware of, um, until they started to see like a, a bubble in their ceiling, right. Or see some discoloration.

Right. Julie, that, that, that happened with you, is, is something like that usually covered under a policy if it's been like a slow, prevalent leak that's happened over an an extended period of time.

Julie (11:54)

And it, it depends too, right on what the actual cause of loss is. Like if it's a covered loss, it could be that the ensuing damages are covered, but maybe not the actual, um, physical thing that actually caused the damage, depending if it was, um, an installation error. No. Tyler installation error, or it could be like a product malfunction or you know, something like that.

But the ensuing damages are typically covered underneath the homeowner's policy. The other thing that honestly, that we need to kind of, you know, discuss quickly is mold. Like if that stuff is not taken care of. In a timely manner, especially in the warmer climates, mold can start to, and then there's typically like a, a cap on how much, um, a, a policy will pay for mold coverage too,

Tyler (12:46)

Especially in these high humidity client climates. Mold phos, you know, just feeds off of moisture. And if you've got this moisture that's occurring on a regular basis, you know, mold can cause some serious health issues as well. Um, we've had a lot of clients move out of their homes for an extended amount of time, um, while they're doing mold remediation.

And a typical homeowner's policy has really limited coverage for mode coverage. So is that something that you should consider if you live in a high moisture, high humidity environment? That we increase that mold coverage, um, so that if you have to move outta the home or there's some significant remediation efforts that needs to happen? that's definitely something that we should, you know, be considering when we're having these conversations with our clients.

Julie (13:35)

Absolutely. Absolutely. So, you know, I grew up in the Midwest, right? So I grew up in Iowa, Minnesota. Oh yeah. Right. Um, oh yeah, you betcha.

In the winter you just keep your, um, keep a drip. Like on your, you know, in your faucets so that, especially on outdoor plumbing and outdoor, pipes that they don't freeze up. So if you have a a, a faucet that just continuously drips a little bit, it avoids, there's a stream of water continuously going through those pipes so it doesn't actually freeze and burst.

But there, you're right, there's like all sorts of tips and tricks, that, that we could go through about specifically freezing pipes.

Tyler (14:12)

Yeah, I, I would say there's

Julie (14:13)

You know you Southern California guy, you wouldn't know that kind of stuff.

Tyler (14:16)

Well, what's what? So it's interesting we're starting to see, you know, as a direct result of the, the, um, the pipe burst situation that we had with the, the freezing pipes in, in Texas. I had a client in, um, Austin, Texas, and in order to bind coverage, we had to have a low.

Temperature sensor and the client's like, I live in Austin, we don't freeze. What are you talking about? And I said, well, actually, um, there was a freezing, you know, situation just a couple of years ago. So in order to bind coverage, we're starting to see, again, mandated from GAR carriers that they have to have a low temperature sensor.

In certain areas of the home so they can see if it's going to be below a certain temperature. There are steps that you can take to either, you know, open up your pipes to make sure that water's flowing or to turn off the water so you make sure that there's not gonna be a pipe burst. The second thing that even in California that we're starting to see as a mandated requirement are gutter guards.

Right. So I, this is something that I'm not, you know, that I, I never saw 10 years ago, I would say not even five years ago, it was a suggestion. But in order to now bind or if you are gonna bind, a carrier is gonna require within a short amount of time that you install gutter guard. So it prevents that ice standing, right?

So it, it, it takes out, make sure that the leaves and other debris that are flowing off of your roof do not fall into. You know, your, your gutters and clog up a gutter that's gonna start, you know, um, prevent a potential, um, Ida situation.

Julie (15:51)

So we could probably talk about this all day But I think that honestly, there are some key takeaways that we were able to hopefully, um, talk about and, tell people about if it be what a flood is.

Um, some statistics, what water damage, um, could occur at the house, um, at, at homes that you're, that you're living in. There's a lot of different key takeaways that we kind of, hopefully brought to, the segment today. And, um, hopefully it was enlightening. So I wanna thank you so much for, uh, joining me and, flood or water damage.

That's the question.

Tyler (16:28)

That is the question. And, to encapsulate, you know, our conversation, this is a major exposure in our industry. Flood and water damage.

I mean, we looks at water damage. Just water damage, not flood, but water damage alone, uh, on an annual basis is between 13 to $20 billion in losses. So it's a big exposure. It's a big risk, and there's lots of things we can do to prevent 'em.

Julie (16:52)

And people wonder why their homeowner's insurance is increasing the premium. Yeah. Well, thank you Tyler. I appreciate it and as always, with the risk rundown, stay safe and stay protected. We'll see you next time. Thanks.

00:10 — Welcome & episode overview: Flood vs. water damage
Julie opens the episode, welcomes Tyler Banks, and introduces the topic of distinguishing between flood insurance and water damage coverage for homeowners.

00:45 — Common client questions: Do I need flood insurance?
Tyler highlights frequent client concerns about flood zones, coverage needs, and determining whether damage is covered under a homeowner’s policy or a flood policy.

01:19 — Trivia: Floods outside major zones
Julie shares that 40% of flood claims occur outside major flood zones, emphasizing that many homeowners may be uninsured and at financial risk.

02:05 — Misconceptions about flood risk locations
The hosts discuss how significant floods like Katrina, Superstorm Sandy, and Harvey occurred outside of Florida, showing that all regions, including inland and mountainous areas, can be at risk.

03:46 — Water damage: How it differs from flood
Tyler explains that “flood” is rising water, while “water damage” comes from leaks or water entering from above. He notes that 25–30% of homeowner claims involve water loss.

04:25 — Common causes of water damage in homes
Julie lists typical sources: burst pipes, leaking appliances, hot water heaters, and roof damage, including incidents occurring while homeowners are away.

05:49 — Preventing and mitigating water damage
The hosts discuss technology like water detection units, insurance discounts for preventative devices, and early detection to reduce claim severity.

06:18 — Gray areas: wind-driven rain vs. storm surge
Julie clarifies that wind-driven rain is considered a homeowner’s water loss, whereas storm surge is categorized as flood under a policy.

07:02 — Flood policy limitations and NFIP restrictions
Julie and Tyler explain NFIP policy caps, coverage limits on additional structures, subgrade levels, and displacement expenses, emphasizing the importance of understanding policy details.

08:02 — Private flood and excess coverage options
Tyler and Julie highlight emerging private flood policies that supplement NFIP limits, allowing tailored coverage for high-value homes and content-only options.

08:49 — Flood risks after wildfires
Julie explains that mudslides and floods can occur on vacant or wildfire-affected land, showing that inland areas are also vulnerable to significant water events.

10:01 — Superstorm Sandy’s impact on insurance industry practices
Tyler notes how prolonged storms like Sandy reshaped underwriting and rating approaches in the Northeast.

11:07 — Coverage considerations for slow leaks and mold
Julie and Tyler discuss slow leaks behind walls, ensuing damage coverage under homeowner policies, and the importance of mold coverage, especially in high-humidity regions.

12:38 — Seasonal tips: Preventing frozen pipes
Julie shares advice for keeping outdoor plumbing from freezing in winter, including dripping faucets, while Tyler notes carrier-mandated low-temperature sensors in certain areas.

14:07 — Gutter guards and other modern preventative measures
Tyler explains the importance of gutter guards to prevent ice dams, noting that carriers are increasingly requiring such devices for coverage.

14:45 — Key takeaways: Educating homeowners on flood and water damage risks
Julie summarizes the episode’s main points: understanding flood triggers, water damage sources, prevention strategies, and policy coverage limitations.

15:19 — Final thoughts: The financial impact of water damage
Tyler emphasizes that annual water damage losses reach $13–20 billion, reinforcing the importance of prevention, proper coverage, and homeowner education.

15:45 — Closing
Julie thanks Tyler, concludes the episode, and reminds listeners to stay safe and protected.