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.
Any homeowner buying a home needs to consider a homeowner insurance policy to protect their investment. A policy can protect in cases of fire, flooding, vandalism and even earthquakes.
Looking for a good homeowner insurance policy does not need to be complicated. The best place to start is by shopping online.
Searching sites will take a few minutes. Be diligent and take into account all options. Read carefully all of the information. Many sites will provide an online chat with an agent for questions. Most big companies will have a toll free phone number. Get informed before purchasing any policy.
One benefit of an online search is that one can do a side by side comparison of more than one provider. They will compare prices, benefits and information regarding the policy. It is very advantageous to find a good carrier. Some people prefer to use a national company. This can be beneficial as the big companies are quick with handling any type of claim.
Looking for homeowner insurance need not be a daunting task. Being informed is the best practice so as not to get taken by a scam. There are scams on the Internet, so be prudent. Take time finding a good policy for your particular needs. If you need help with a reliable agent, contact us. We’ll be glad to offer you some names of insurance agents and insurance companies we’ve dealt with in the past which have good reputations.
In light of all the unfortunate flooding we’ve all been seeing on the news of late, you may be wondering, “What if this happened to me? How can I protect myself and my family?”
According to FloodSmart.gov (the official site of the National Flood Insurance Program), everyone is at risk of flooding. Floods can happen almost anywhere. In fact, floods are the most common natural disaster in the U.S. They can happen even if you don’t live in a high-risk area. For instance, a flood can happen during winter when temperatures rise suddenly and the frozen ground can’t absorb the melting snow.
Floods can be extremely costly. Over the last 10 years, the average flood claim has amounted to approximately $48,000. For instance, the cost of a 6-inch flood in a 1000- square foot home is about $20,000.
Who Is Required to Buy Flood Insurance?
For homeowners who live in coastal and high-risk zones, flood insurance is mandatory. The Federal Emergency Management Agency (FEMA) mandates it for any mortgage that is backed by the government.
For homes built in low to moderate-risk and undetermined risk zones, flood insurance is optional. While flood insurance is not federally required for moderate-to-low risk areas, it is still recommended. Some people choose to purchase flood insurance just for the peace of mind.
Is My Home In A Flood Zone?
Even if you are renting, it’s still wise to learn if your home is in a flood zone. You can ask your insurance company or your community floodplain manager for a Flood Insurance Rate Map (FIRM). A FIRM will generally show a community’s base flood elevations, flood zones and floodplain boundaries. Keep in mind that FIRM maps are constantly being updated due to changes in geography, construction, mitigation activities and meteorological events.
How Can You Buy a Flood Insurance Policy?
Unfortunately, standard homeowners’ insurance doesn’t cover flooding. This means homeowners have to purchase separate flooding insurance. There are two ways an owner can purchase flood insurance:
- If the property is required to have flood insurance and is financed with a federally backed mortgage (FHA, VA, Fannie Mae, Freddie Mac) then the owner can purchase insurance through the National Flood Insurance Program (NFIP).
- If the property is not in a high-risk or coastal area and having flood insurance is optional, then the owner can purchase a policy through the NFIP or with an insurance company that offers this type of insurance.
Keep in mind that regardless of where you purchase the flood insurance (NFIP or an insurance company) you will always use an insurance agent to purchase it. You can always contact the NFIP for a referral to an insurance agent.
If you have questions about flood insurance that we didn’t answer in this article, please click the comment link and ask. Your email address is never shared with anyone, nor will it be published on this website. We’d love to hear from you.
Many homeowners believe their homeowner’s insurance policies will cover them for practically any damage sustained to the house or contents. The reality is that homeowner’s policies contain many exclusions and restrictions on coverage that can leave you with a coverage gap. Here are five common myths about homeowner’s insurance.
1. Loss-of-Use Coverage
If you have damage to your home severe enough that you cannot live in it while it is repaired, you likely expect the insurance company to put you up in a hotel while the work is being done. However, that is not necessarily the case. Not all policies include a loss-of-use provision. If you have to pay for a hotel, meals and other services out of pocket, it can add up quickly and put you at financial risk. If loss-of-use is covered, it will be stated explicitly in your policy, along with any limits of coverage.
2. Replacement Cost
Replacement cost in a homeowner’s policy refers to valuing the loss at the amount it will cost to replace the item. For example, if your four-year-old computer is lost in a fire, replacement cost coverage would allow you to purchase a new one with similar features. Most homeowners believe that is what will happen if they have a claim, however, the bulk of policies do not carry this clause. If not included, losses will be valued at what they were worth in their condition before the loss occured. The four-year-old computer might be valued at $250 – not enough to purchase a new one. Replacement cost clauses are a valuable inclusion in a homeowner’s policy.
3. Flood Coverage
Almost all homeowner’s policies exclude flood coverage, along with earthquakes and other natural disasters. Floods can occur from a number of causes, such as hurricanes, burst pipes or sewer backup. A flood is one of the most common causes of home damage and the destruction of contents. There are companies that specialize in flood coverage, and, if you live in a susceptible area, look into having a separate flood policy. Your mortgage company may require this additional coverage as well.
4. Termites
Termites live all over North America but are most destructive in Southern climates where their lifecycles are not impacted by cold weather. Termites eat wood – lots of it – and can eat the supports in your house as easily as fallen leaves in the forest. They live in large colonies and, collectively, can destroy the structure of your home. Repairing termite damage and eradicating them can cost thousands of dollars. Most policies exclude termites and other pest damage. If you live in a susceptible area, the best insurance is to have the house regularly checked and sprayed by a professional. You may want to consider an annual termite contract from a reputable pest control company.
5. Valuation of Loss
When you have a home insurance claim, the insurance company will send out an appraiser to determine the extent of the damage and the best way to fix it. The appraiser will assess a value to the loss which will be the minimum the insurance company can pay in order to meet their contractual obligations. However, you do not have to take that value as final. If you can prove your loss should be valued higher, you can negotiate the settlement with the company. Keeping receipts and pictures of valuable items will help you back up your claim.
The Bottom Line
To really know what is in your homeowner’s policy, you should read it thoroughly. Look for exclusions to coverage and decide how you will cover those risks. In some cases, your insurance company will have separate add-ons that they can attach to your policy or you can get specialized insurance from another company. For those risks that cannot be insured, analyze how you will financially cover those risks if they should happen.