New policy levels coverage

Private flood insurance now an option for some homeowners
NEW YORK -- Stories lately about tsunamis, mudslides and overflowing rivers have laid bare the lack of private flood-insurance protection here in the United States.
However, the tide now seems to be shifting.
In a little-noticed move in November, AIG Private Client Group began offering a policy that embeds flood coverage in homeowners insurance but lacks many of the coverage limitations and restrictions found in federal flood insurance.
The policy, which covers only low-risk and moderate-risk flood areas, is currently available in Massachusetts, Illinois and Colorado, but a national rollout is under way.
It is believed to be the first of its kind in the United States.
"We're the only insurance company who has stepped up to provide this coverage," said Ross Buchmueller, president of AIG's private client group.
If other insurers move to provide similar coverage, such policies could change the dynamic of flood insurance in the United States.
Many people assume that flood coverage is automatically included in homeowners insurance, but when a major flood event occurs they have to pay for costly repairs out of pocket. The federal government -- the main flood insurance provider -- caps flood coverage and sets restrictions on what constitutes a flood and how much can be paid out for certain damages.
Some private insurers have responded by offering coverage in excess of the federal amount, but those policies are still subject to several government limitations. As a result, many people with high-priced homes are left out to dry.
There has been a way to cobble together flood-insurance options. Before the AIG coverage, the best approach was to get a high-quality homeowners insurance policy, and couple it with the government's National Flood Insurance Program, or NFIP. Then you could add an "in excess policy" that provides coverage beyond the NFIP.
The maximum NFIP coverage for a single family home is set at $250,000 for structural damages and $100,000 for contents. While this coverage can recuperate minor flood-related losses, or even major losses to moderately priced homes, even the maximum NFIP coverage won't offer much help with major damages to multimillion dollar homes.
While purchasing the NFIP policy plus excess coverage could ensure full protection in the event of a flood, plan holders are still met with limitations as to when the policy will cover repairs and how much will be paid out.
That's where the new AIG coverage comes in. For example, the NFIP stipulates that to receive coverage, a flood must involve two or more acres of normally dry land or two or more properties, at least one of which is the policyholder's property. Therefore, if you have an NFIP policy and only your home is damaged, you're out of luck. With the AIG Private Client Group policy, however, those restrictions don't apply.
Complete coverage
Additionally, the NFIP won't cover damages to basement improvements, such as finished walls, floors, ceilings, or personal belongings that may be kept in a basement. Its coverage is limited to plumbing, electrical wiring, drywall and typical basement utilities. And with the NFIP, only certain appliances, such as washers, dryers and refrigerators are covered.
The AIG policy, however, will cover $25,000 for basement improvements, and does not limit coverage to specific items. Basement contents can be covered up to $10,000.
There are several other perks as well with the AIG policy. In the event of a flood, homeowners can receive up to $5,000 for extra living expenses, up to $25,000 for costs related to laws requiring repair, rebuilding or demolition of property damaged by a flood, and as much as 10 percent of the amount of the covered dwelling loss. None of these are covered by NFIP.
AIG isn't disclosing the cost of the coverage, since it's not a distinct premium from its traditional homeowners policy.
The overall cost will vary based on the size of the home, property, deductible and a variety of other factors.
In the states and risk zones where it's available, everyone gets the same coverage as the government program -- $250,000 for the house and $100,000 toward contents. Beyond that, you're free to buy as much extra insurance as you'd like.

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