The flood damage from Hurricane Irene raises pressure on Congress as it debates how to overhaul the government’s debt-strapped flood-insurance program. Unlike wind damage, flood damage typically isn’t covered under homeowners-insurance policies. Instead, homeowners and businesses buy coverage from the National Flood Insurance Program.
The program is treading in dangerous waters as Congress debates on whether to continue the program and if so, how much should the annual rates be increased. The Senate is debating the potential of 15% annual increases while the House of Representatives looks at 20% increases for homeowners.
That can be a huge cost increase as these costs compound year over year. What this can mean is that based on the House’s proposed increase the rates would increase 298% in 7 years. The Senate’s proposal would increase costs 231% in that same 7 year window. That can be a significant cost.
Of course, the program has lost 18 billion dollars over the past few years so the government does need to recoup their losses. And the impact of shutting down the program could be even more extreme for the coastal housing market.
Lawmakers remain unlikely to thrash out a long-term agreement before the program is due to expire Sept. 30th, but a short-term extension of the program is considered likely.
As homeowners along the Eastern seaboard assess the damage done by Hurricane Irene, we may be looking at more than just property damage incurred.
The hurricane is likely to create a setback for an already uncertain real estate market in communities from North Carolina to Vermont, where residents have already seen their homes severely damaged or even destroyed.
Experts say the storm could delay pending homes sales and, in the longer-term, potentially depress home values. For homeowners teetering on the brink of foreclosure, the devastation caused by Irene could be a deciding factor in losing their homes. Insurers say total damages from the storm could be between $7 and $10 billion, according to published reports.
Some insured homeowners may not have policies that cover the full cost of the damage. That could pose challenges in paying for repair or rebuilding costs.
Banks may also face a tough time in processing home foreclosures. Bank-owned property that is badly damaged and unoccupied could delay the process.
Home sales that are about to close could see delays that last days, weeks or even months depending on the extent of storm damage.
The communities devastated by Irene could see their home sales dramatically impacted in the coming months. Homeowners may be asked to sign affidavits attesting that their home values are the same as when they were previously appraised.
It’s never too soon to assess your homeowner’s insurance policy to make sure you’re adequately covered the next time Mother Nature comes calling. We all know it’s not a matter of if, it’s a matter of when. So take the time now to make sure your insurance covers you for the things that matter.
Paying for more homeowners insurance than you need is a waste of money, but it can prove even more costly to get caught without enough coverage.
What you need is “just the right amount” of coverage. Here’s how to get it, and it shouldn’t take more than 4 or 5 hours of your time spent reviewing your homeowners insurance policy, talking to your agent, and doing a little research.
Review Your Coverage
All homeowners insurance isn’t created equal. That’s why it pays to review your coverage every year to ensure your policy meets your changing needs. Begin by understanding the types of coverage available.
Actual cash value coverage reimburses you for the value of your home based on its current condition. If your home was built 10 years ago, you’d receive only the depreciated value of decade-old windows, cabinets, appliances, and so on.
Most insurers recommend the more comprehensive replacement cost coverage. With it, you’ll be reimbursed for the amount it will cost to rebuild your home like new with the same kind and quality of materials. Depreciation doesn’t factor into the settlement equation.
To get the full benefit of replacement coverage, you need to purchase enough insurance to cover the total cost to rebuild your home, excluding the value of the land. Many people make the mistake of insuring at the market value. But the amount you could sell your home for today isn’t necessarily the same as how much it would cost to rebuild.
Construction Costs Are a Big Factor
Look to current construction costs in your local area for guidance. If you’ve purchased a newly constructed home in the past year, you already have the answer. The same is true if you’ve refinanced within the past year. You almost certainly paid for an appraisal during that process that likely includes three valuations: replacement cost, market value, and actual cash value.
If you’re determining replacement cost without those head-starts, call several local homebuilders and ask the average square-foot construction cost in your area. If the going rate is $175, and your home is 2,000 square feet, you’d purchase $350,000 in coverage. For just a few bucks you can also order a valuation report online at a website like AccuCoverage ($7.95) or Home Smart Reports ($6.95).
Remember that any time you spend at least 5% of your home’s value on a remodeling project—or $5,000, whichever is less—you should contact your insurer to increase your coverage.
Valuables and Liability
Be sure you’re insured at the right value for your home’s contents and for personal liability. Most insurance polices provide only actual cash value on contents. To get replacement cost coverage, you’ll need to purchase an endorsement. If you have valuables not covered by your policy—silverware, jewelry, furs—purchase endorsements for those, too.
Many people pay no attention to the liability coverage limits in their policies, but that’s a mistake. If you have a dinner party and a guest falls down your front steps, you don’t want to be underinsured. In recent years the average liability claim for bodily injury and property damage has been $15,854. You can often times increase your liability coverage by several hundred thousand dollars for just $10 to $15 more per year.
You know how important it is to have medical insurance, but should you have dental insurance as well?
What about you? Do you have dental insurance? If so, how much is it costing you each month? And do you feel that it pays for itself? We’d love your feedback. Just click the comment link below..
If you’re a member of an association, like the Elks or AARP, you’ve no doubt seen the pitches: get your life, car or home insurance from us and save money. But do you?
Have you shopped these association offers to compare? What have you found? Higher costs, or deals?