Tag Archives: flood insurance

Problems home insurance

 

Problems you may encounter are covered by a Standard Home Insurance Policy.   Insurers require special policies for some risks.  Most basic policies exclude claims for earthquakes, floods and landslides.  If you have an exposure, you should definitely look into coverage.

Many homeowner’s policies are however becoming more difficult to understand.  Insurance carriers are adding language that shifts risks and costs to policyholders.  All contracts which contain fine print should be carefully read.  By doing so you may thus discover problems that could be hiding in your home insurance policy.

Earthquakes:

In the past, earthquake loss was assessed using a collection of mass inventory data and was based on experts’ opinions.  Today it is estimated using a Damage Ration (DR), a ratio of the earthquake damage money amount to the total value of a building.  Another further method is the use of HAZUS, a computerised procedure for loss estimation.

California however is not the only state with a serious earthquake hazard problems.  There are several lesser-known fault zones in other parts of the country.   Another danger zone with problems is New Madrid, Missouri.  The Wasatch Fault is especially relevant because it lies underneath Salt Lake City.  This could be bad news for the area that has 185, 000 vulnerable buildings made of unreinforced masonry that are not built to survive an earthquake.  Alaska and Hawaii are also another two earthquake hotspots.

You can also view earthquake hazard maps on U. S. Geological Survey’s website.

Flooding:

Most natural disasters, such as hurricanes, tsunamis, and rainstorms involve flooding.  You can determine your flood risk by visiting FloodSmart.gov.  Flood coverage is also available from the National Flood Insurance Program (NFIP) and some private insurers. While flood insurance may be available to you, its cost will be tied to your risk.  If you are in a community prone to flooding, flood insurance may be costly.

Landslides:

Although landslides happen throughout the country, some regions are more susceptible.  The U. S. Geological Survey’s website has a map highlighting landslide-prone areas

Wind Deductibles

The Insurance Information Institute (III) says your homeowner’s policy deductible may be a specific dollar amount or a percentage of the total amount of insurance on your policy.  In addition, there are two common types of home policy deductibles, which cover most mishaps, such as fires and burglaries.  The second type is a wind deductible for properties in hurricane or windstorm prone regions.

Problems that could be hiding in your home insurance policy may be related to wind deductibles.  Hurricane deductibles apply to damages solely from hurricanes.  Windstorm deductibles apply to any wind damage, including hurricanes.  Wind deductibles can be for a fixed amount or a percentage of the insured value.  If your house is insured for $500 000 and has a 5% deductible, the first $25 000 of a wind-related claim must be paid out of your own pocket.

Anti-concurrent causation clause

Check your policy closely to see if it includes an often-overlooked anti-concurrent causation (ACC) clause.  If a structure is damaged by two causes, such as wind and flood, and one cause is covered by insurance and one is not, an ACC clause may limit your claim or block it completely.

It is a trap door built into the back of your policy.  Try to find a homeowner’s policy without an ACC clause.  If  you can’t, ask your broker about buying an add-on policy to fill any gap in coverage.S

Spikes in building costs

If you have a mortgage on your home, your lender likely requires you to buy a homeowner’s policy.  Typically homeowners insure their homes for an amount that is adequate to replace it.  Your rebuilding costs will include the price of materials and labour.  When there are problems such as fires or floods that damage numerous structures throughout a single community, building materials and labour temporarily are in high demand.  This can cause a spike in your rebuilding costs.  Most insurers sell extended coverage add-ons that increase your basic homeowner’s policy coverage to make sure you have enough money to rebuild.

Updates in building regulations

Changes in building codes sometimes require construction upgrades if your home is badly damaged and must be repaired or replaced.  For example, most noteworthy,  the new code may require a higher elevation for your home if you are in a flood zone.

Standard policies will not cover these extra construction costs.  You can purchase supplemental insurance to cover your risk.

Certain information Insurers will not disclose

A physician in suburban Chicago had insured his life, home and car with a particular insurer.  However, during a period of 10 years, he had never filed a claim, until a damaged roof and a burglary led to two claims totalling $3, 000.  He immediately installed a home security system.  The insurer did not give him a discount, but dropped him from its preferred coverage citing his “claims history” and instead offered him its standard carrier at a higher rate even though his risk profile had not really changed.

Finally if your home is near the water or in an earthquake-prone zone, insurers will shun you.  Some insurers use illegal underwriting guidelines to redline (discriminate against).  Agents say they often get memos identifying undesirable ZIP codes or reminding them to stay away from couples who are having problems in their marriages.

In conclusions, you could potentially file your one claim and then have your coverage terminated.  Some insurers will unfortunately drop you if you start an at-home business, while others will furthermore label you too risky if you have missed a credit card payment or two.

 

 

 

 

Rising sea levels

Rising sea levels could cost homeowners $882 billion.

The journal “Nature reported that sea levels could rise more than 6 feet by the end of the century.

If this happened, Florida could lose 1 million homes. This would be 13 percent of the state’s housing stock. In addition the value of this loss would be $400 billion. The figure does not include commercial building. Neither does it account for public infrastructure or future appreciation in home values.

Government could build barriers to protect coastal communities from rising sea levels. However, there is no doubt that there will be major losses when waters move in.

Even a 2 foot increase in sea level would ultimately see a loss of $74 billion in home value. Especially relevant, Florida would lead the way with $17 billion losses in home value.

In a catastrophic 6 foot rise situation, New York City would lose about 32,000 homes at $27 billion in value. Newport Beach California could also lose homes values at $10 billion.

A small community lies in close proximity to the Puget Sound. The homeowners with mortgages have to carry flood insurance. Furthermore, the cost of that insurance is exorbitant.

Homeowners have been warned that flood insurance premiums are going to go up dramatically over the next few years.

Flood maps that FEMA use to determine flood risk and help insurance companies to calculate rates, have changed in Tacoma’s coastal area. Base flood elevation levels are however rising several feet. Approximately 280 homes are affected by the map changes.

Existing homes don’t have to be raised. However, any remodelling or additions must be rebuilt at the new height. This can be several feet higher.

FEMA said the agency is already phasing out flood insurance subsidies for homes. Homes in Titlow Beach and Salmon Beach need to get an elevation certificate. This costs $1000. Unless produced, flood insurance rates will thus increase by 25% per year.

When a potential buyer eventually finds out that they must have flood insurance it may have a further negative impact on home values.

Lenders may not want to offer mortgages where homes are below the base flood elevation. Most noteworthy, even with flood insurance, homeowners have been told that the policy would not unfortunately cover tidal overflow or flooding caused by high tides.