This blog is the latest in a series on the questions that we get asked when clients are buying FloodFlash policies. The first focused on where you should place your FloodFlash sensor. This one is about how the choose the amount of cash you want to be paid, and at what depth you want to be paid it.
It’s good news…it’s actually really simple, and if you’ve ever taken out a life insurance policy, you’ll have already done something very similar.
Life insurance, like FloodFlash, is designed to cover an event that is rare and not nice to think about — but also something that is very difficult to assign an exact value to. That means that when you buy life insurance and select the size of your policy, the idea is not to worry about super-precise calculations about what might be needed. It’s just about making sensible assumptions around what could be needed to recover if and when the worst happens.
FloodFlash’s flood insurance should be thought about in this same, simple way: establish a fixed sum — that for an affordable premium — will ensure your livelihood can keep going.
This can seem intimidating at first, but with a little thought, it quickly becomes quite simple. Most customers aim for a settlement that they believe would pay out enough to replace stock, equipment and repair any damage to the property that they are responsible for.
On top of any physical damage, many customers take into consideration how their revenue would be affected should there be a flood (i.e. business interruption cover). Remember: you can use FloodFlash however you want.
Though the FloodFlash sensor is always attached to a physical building, lots of customers use FloodFlash to protect items that are outside those buildings but difficult or expensive to obtain cover for. We have seen FloodFlash used to cover:
The settlement value you choose for FloodFlash is different to the sums you might give to an insurer for a traditional policy — often called ‘buildings declared value’ (BDV), or ‘buildings sum insured’ (BSI). BDV and BSI are measures of the total value for the property, but the figure you give FloodFlash is for the immediate cash settlement. We don’t need to know the total property value or anything like that.
You might be used to giving a BDV of £1m — but a £1m FloodFlash policy is likely to be much larger than what you would actually need after a flood (and too expensive). Depending on your situation and your business, a settlement of £200k, £100k or even £50k might be sufficient, and the premium significantly more affordable.
Rather than choose a policy based on settlement size, many customers simply choose a policy that fits their budget.
One FloodFlash client had flood cover withdrawn from their main commercial policy but was able to negotiate a £1,800 discount on their premium as a result. They then simply looked at their FloodFlash options and chose the most appropriate depth/settlement combination that £1,800 could buy them. This is also totally fine.
FloodFlash pays the fixed amount when water reaches the pre-agreed depth — but how do you know what depth to choose? It’s useful to think about what depth of flooding your business could survive because your FloodFlash premium will always be cheaper if you are able to select a greater depth.
When you’re figuring out what to set your trigger depth at, you should consider at what point water damage would start getting to business-crippling levels. This will be dependent on your type of business and building.
The depth is measured by your sensor above the external ground at the point where you’ve installed the sensor, so it’s not a silly idea to simply get the tape measure out and get an idea of what you need.
FloodFlash can be adapted to suit any budget. The premium is simply a reflection of risk, so investments to reduce your risk immediately generate savings on your premium.
Like in the examples above, if you can raise expensive items, stock, infrastructure, etc, you’ll be able to set your trigger depth higher and pay less. Property-level flood protection (PLP), such as barriers, dovetail perfectly with your FloodFlash policy and are a brilliant way to make savings. They allow you to resist any flood damage and lower depths, and therefore pay less for your FloodFlash policy.
Here’s an example: if your FloodFlash quote is £4,000 for a 20cm settlement and £1,000 for a 60cm settlement, you can save £3,000 on your policy every year if you’ve invested in physical PLP to protect you up to that 60cm level. Check out The National Flood Forum, which has some brilliant resources on how you can use PLP to protect your business.
If you have any questions about how to think about selecting your settlement, or for any other questions at all, don’t hesitate to drop me and the team a message today.