NEED FLOOD INSURANCE TODAY? SENATE SAYS, NO WAY!

For the fourth time, the US Senate has let the funding for flood insurance lapse.  What does this mean for the economy?    Basically it puts a halt to any loans that are in process, where the loan collateral is in a flood zone requiring flood insurance.  You can read more about the lack of funding here: http://bit.ly/dAQhu5

Why is it so hard to fund the National Flood Insurance Program?  The answer is political and probably better left off this blog!

So what can you do if you need flood insurance now?  Unfortunately, not much!  You can wait until the Senate reconvenes and decides to fund flood insurance or you can try to convince your mortgage broker to accept one of the alternative flood insurance offerings available through Lloyds of London or other brokerage houses only available to those who live in some states.

Frustrated?  Call your Senators through the US Capitol Switchboard: (202) 224-3121 and let them know.
 

Do You Really Need Flood Insurance?

According to the Federal Emergency Management Agency (FEMA), flooding can cause several billion dollars of property damage in the United States each year. If you are like many homeowners, however, you may be unaware that the standard homeowners insurance policy you buy does not cover flood losses. You may believe that you have a low risk to this peril but FEMA reports that approximately 25 percent of all flood claims occur in communities in which flooding is deemed to be a low to moderate risk. So do you really need a separate flood policy? The following tips and ideas may prove helpful in answering this question.

• Contact your insurance agent to see if you live in a community that participates in the National Flood Insurance Program (NFIP), a prerequisite in order to qualify for flood insurance. Participating communities must agree to adopt and enforce certain floodplain management regulations, including building construction and zoning laws that minimize the risks of flood damage.


• Ask your insurance agent to see if you are in a floodplain. Or, if you prefer, go to http://www.floodsmart.gov/ and select “What’s Your Flood Risk?” which will ask you to enter your home address. This Web site will then specify whether you are in a low, moderate, or high risk area.


• Consider purchasing flood insurance even if you are in a low-to moderate-risk community. In these areas, you may be eligible for the Preferred Risk Policy, with premiums as low as $112 per year including coverage for your personal property.


• Note that a flood policy does not take effect until 30 days after you purchase the coverage. Thus, if the local meteorologist announces a flood alert for your community and you try to purchase coverage, it is already too late.


• The maximum limit of insurance in the NFIP for your home itself is $250,000. If your residence’s value exceeds this amount, ask your insurance agent about excess insurance for losses above the federal policy’s maximum limits.


• Don’t assume that the government will bail you out if you suffer a flood loss and don’t have a flood insurance policy. That decision is a gamble you may not win. Remember that federal disaster assistance, if available, is usually a loan that must be paid back with interest.


• Discuss all the pros and cons of flood insurance with your agent before making your final decision.

EVALUATE YOUR NEED FOR FLOOD INSURANCE

Image via Wikipedia

According to FEMA, flooding causes billions of dollars of property damage in the United States each year. If you are like many homeowners, however, you may be unaware that the standard homeowners insurance policy you buy does not cover flood losses. You may believe that you have a low risk to this peril but FEMA reports that approximately 33 percent of all flood claims occur in communities in which flooding is deemed to be a low to moderate risk. So do you really need a separate flood policy? The following tips and ideas may prove helpful in answering this question.

* Contact us to see if you live in a community that participates in the National Flood Insurance Program (NFIP), a prerequisite to qualify for flood insurance. Participating communities must agree to adopt and enforce certain floodplain management regulations, including building construction and zoning laws that minimize the risks of flood damage.

* Ask us to see if you are in a floodplain. Or, if you prefer, go to http://www.floodsmart.gov/ and select "What's Your Flood Risk?" Enter your home address and this Web site will tell you whether you are in a low-, moderate-, or high-risk area.

* Consider purchasing flood insurance even if you are in a low-to moderate-risk community. In these areas, you may be eligible for the Preferred Risk Policy, with premiums as low as $112 per year including coverage for your personal property.

* Note that a flood policy does not take effect until 30 days after you purchase the coverage. Thus, trying to purchase coverage after the local meteorologist announces a flood alert for your community won't work.

* The maximum limit of insurance in the NFIP for your home itself is $250,000. If your residence's value exceeds this amount, ask us about excess insurance for losses above the federal policy's maximum limits.
This insurance may be available from private insurers.

* Don't assume that the government will bail you out if you suffer a flood loss and don't have a flood insurance policy. That decision is a gamble you may not win. Remember that federal disaster assistance, if available, is usually a loan that must be paid back with interest.

* Discuss all the pros and cons of flood insurance with us before making your final decision.

DANGERS OF GOING BARE ON WATERCRAFT COVERAGE

Boatowners typically face large property and liability loss exposures from their boating activities while often going without proper insurance. The following loss scenarios point to the need for specialized boatowners coverage. Remember that many of these loss examples are not covered (or have tough restrictions) under the standard personal auto or homeowners policies.

• Your cruiser collides with a speed boat whose operator fails to yield the right of way, causing extensive damage to your boat. The owner of the speed boat does not have any insurance coverage.
  


• An expensive bass boat you just purchased is stolen from your home.
  


• Your 27-foot-long sailboat is damaged by a major hailstorm while docked at the marina.
  


• Your sport fishing boat is struck by lightning, incapacitating its electrical system.
  


• Your son's friend is water skiing behind your boat and he falls into the lake, injuring himself, due to the excessive speed of the boat.
  


• You negligently cause another boat to overturn to avoid a collision.
  


• Your outboard motor explodes, seriously injuring your next door neighbor.
  

If you have any watercraft exposures, please call me for a review of your loss exposures and insurance solutions.

ARE THE LIMITS OF INSURANCE FOR YOUR HOME ACCURATE?

Is the amount of property insurance on your home correct? What is the appropriate amount of coverage for your home? To begin with, it should be insured for at least 80 percent of its replacement cost when covered under a standard homeowners policy. Replacement cost refers to the amount necessary to repair or replace damaged building parts with items of like kind and quality. Some insurance companies even require 90 percent or higher figures when the guaranteed replacement cost option is offered.
With this option, the policy pays the full cost of replacing your home, without any depreciation and often without a maximum reconstruction payment. (This gives you added protection if there is a sudden jump in construction costs due to a major shortage of certain building materials.
Construction costs often "surge" following large catastrophes, such as
hurricanes.) Note that guaranteed replacement cost coverage approaches can vary by state and are not even available in every state.

Many homes are either underinsured or overinsured. For example, some homes insured for long periods of time with one insurance company may have inadequate limits of insurance due to increased building costs. In many cases, homes have been remodeled and improved, and this information has not been conveyed to the insurance agent or company, resulting in severe underinsured home values. If your home is underinsured, you not only have inadequate protection for total losses, but you may also lack full protection for smaller losses.

Sometimes homes are mistakenly insured for their market value. However, market value is normally not indicative of the home's replacement cost.
For example, market value also reflects the cost of the foundation and the nondestructible land value, both of which normally survive intact if the house burns to the ground and has to be rebuilt.

In addition, some homes may be insured improperly to meet mortgage company requirements. Some mortgage companies require the amount of insurance be at least equal to the mortgage balance on the house. The mortgage balance is also not reflective of the home's replacement cost, which is often considerably more but can also be less. Insurance companies and agents often struggle in properly educating mortgage companies about these distinctions, but there is nothing to prevent you from insuring to actual replacement cost if that is indeed greater than the mortgage balance. The problem occurs when the mortgage balance is greater than the replacement cost, which will result in the purchase of a higher limit than needed.

The bottom line is that you should work with your insurance agent to determine the correct replacement cost and resulting insurance limit for your home. Most agents use sophisticated replacement cost estimating packages that can fairly and accurately determine the replacement cost value of your home. Factors that these programs use to determine this figure include the following.

• Square footage of the home, including its configuration
  


• Construction costs for your community
  


• Exterior wall construction type, including frame, stucco, brick, or brick veneer
  


• Style of home
  


• Number of bathrooms and bedrooms
  


• Roof type
  


• Attached garages, fireplaces, built-in cabinets, and other special features, such as hardwood floors
  

The more advanced replacement cost estimating programs require detailed information to improve the valuation estimate. For example, a rectangular-shaped home with 1,800 square feet will have a much lower replacement cost than a similar-sized home with an "L" shape. In other words, the better cost estimating programs require information about the number of corners in the home. The more detailed information your agent asks about your home, the more confidence you can place in his or her recommended limit of insurance.

As a final note, you should request an annual review of your homeowners policy to keep up with increasing building supply and labor costs. Also ask your agent about the advisability of adding an "inflation guard"
endorsement to your policy or about the availability of guaranteed replacement cost coverage to help assure that your home is properly protected.