Flood Insurance – Take it or leave it?

Check out FEMA’s flood insurance rates here – Official site of the National Flood Insurance Program.

10-6-2017: Real Estate: The Federal Flood Insurance program revisited. Two nuclear options to fix the Billions of Dollars we are short on to fund the damage and reconstruction: (a) Cash Out and Credit the Honmeowner for the difference or (B) The Next Claim Is Your Last Claim.

9-11-2017: Per Wall Street journal September article, hurricane insurance deductibles (regardless of your homeowner’s policy deductible exists,) can range from 1-10% of a home’s value.

9-4-2017: Per 8-30-2017 WSJ article on page A1, about $19 Billion in losses of the $1.24 Trillion coverage of 5 million NFIP policies are non-residential businesses. Most businesses are charged high premiums and are confused about risks. It was noted Hurricane Katrina cost approximately $160 Billion in losses. Private insurers are reluctant to write policies given risk analysis and seling to those in greatest areas prone to flooding. FEMA Estimates reveal possibly 444,000 flood policies in Texas and 490,000 in Louisiana may be affected by Hurricane Harvey.

7-22-2017: The national flood insurance program provides $1.25 trillion in coverage for about 5 million policyholders nationwide. Policies are issued by private insurers but are backed by FEMA. The flood program is indebted to the U.S. Treasury for $24.6 billion after massive payouts for damages caused by Hurricane Katrina, Superstorm Sandy, and other recent and devastating floods.

3-31-2015: Flood insurance premiums set to rise about 20% due to huge deficits in the National Flood Insurance Program.

8-23-2014: Due to the outcry from residents over the steep Federal flood insurance rates caused by excessive Federal insurance payouts and the passing of the Biggert-Waters Flood Insurance Reform Act of 2012, the Homeowner Flood Insurance Affordability Act of 2014 became law on 3-21-2014. The law basically repealed certain recent rate increases from the Biggert-Waters Flood Insurance Reform Act of 2012 and restored some grandfathered rates.

3-17-2014: Apparently,now that the huge premium increases should be inder control, more now than a month or two ago…Both the US House (H.R. 3370) & US Senate (S. 1926) passed their versions of legislation to adjust the rapid & excessive flood insurance premium increases that caused angst and “sticker shock” for many potential Buyers of coastal/waterfront properties, especially in areas like Florida, where property values have tried to come back to respectable levels only to get an annual flood insurance bill sometimes >$50,000. I’m not sure when it officially becomes law (since both bills have to be resolved into one bill), but it calls for retroactive refunds of those who paid the excessive premiums. Source: http://www.insurancejournal.com/news/national/2014/03/04/322194.htm

3-6-2014: Now that the US House of Representatives has passed proposed legislative change to flood insurance rates, it’s now up to the US Senate and House to negotiate a solution (in addition to responding to 40_ other pieces of legislation buried in Senate in-boxes).

2-26-2014: Due to the sudden rise in Government flood insurance premiums (because after taking $3.5B in premiums the Gov’t is $24B in debt), private insurers like Lloyds of London, AIG, Fireman’s Fund, Chubb, and HCI Group are coming in providing policies – sometimes or far less than Government Flood Insurance Program. Source: WSJ, 2-26-14, C3.

1-24-2014: 2012 changes – 2nd properties, businesses, and properties with multiple claims faced at least a 25% insurance premium increase. Many existing homeowner premiums may not rise unless they sell their property – then the new owner will get tagged with a huge rate increase. Source: WSJ, 12-20-2013, A6.

12-19-2013: A December 18, 2013 WSJ opinion article on page A18 mentioned that the National Flood Insurance Program was already $24 Billion in debt on a $1.3 Trillion of property insurance over 5.5 million property owners by the Federal Insurance Program. Also, FEMA Administrator Craig Fugate was heard by a US House committee that he felt the program should eventually move to a private insurer risk pool and out of the hands of US taxpayers. Do you agree?

11-21-2013: Private flood insurance option are growing in Florida – more expensive than earlier FEMA policies, but much cheaper than current FEMA charges in many cases. Source: http://tbo.com/pinellas-county/congress-holding-hearings-on-flood-insurance-hikes-20131119/

10-1-2013: Flood Insurance rates in Florida could be in tens of thousands of dollars. Source: http://www.wtsp.com/news/local/article/337999/8/Flood-insurance-hikes-could-devastate-real-estate-market

8-28-2013: Given the pending tidal wave (pun intended) of rising insurance rates, you may have to leave it unless you have (a) a government loan which will require you to carry flood insurance; (b) another lender who requires it; or (c) just want to take the chance the repairs/damages are less.  There are some reports of rates going from under $1,000/year to close to $30,000/year.  This is for 2 main reasons:  (1) the National Flood Insurance Program lost $24 Billion so far and (2) FEMA and the state agencies are redrawing their maps to include many more properties requiring coverage due from excessive storms (like Hurricane Sandy) and rains that swelled creeks and rivers. Source: Wall Street Journal, August 13,2013, Page A3

7-14-2012: Congress reauthorized the National Flood Insurance Program for another 5 years – buying votes and kicking the can down the road – helping 5.8 million homeowners (even those stupid enough to build/own on rivers and flood areas) force taxpayers to subsidize their lifestyle choices. I don’t mind insurance, but how about private insurance? Why do taxpayers need to be concerned about the choice of where someone lives?
Source: http://www.homefinder.com/news/real-estate/2012/07/12/congress-reauthorizes-the-national-flood-insurance-program/

5-11-2012: The National Flood Insurance Program is set to expire on 5-31-2012 unless renewed. If it doesn’t, many people will be inadequately covered since private insurers can’t cover the losses. However, the big question is, how can we turn more coverage over to the private sector and of the shoulders of the US taxpayer? Should homeowners take up more of the responsibility and pay even higher premiums for a casualty? Is it “fair” to ask your tax revenue to pay for someone who made a choice to live in a high risk area? Will Rep. Ron Tester’s (D-Montana) proposed bill to extend National Flood Insurance for another 5 years? Watch Cspan’s coverage and tune in for more discussion up to the 5-31-2012 deadline: http://www.c-spanvideo.org/program/305915-2

Update 5-11-2012:  National Flood Insurance Program (NFIP) paid out $6+ billion in losses from 2006-2010…Almost 6 million policies covering $1.25 trillion in property. Most people are asking for reform (which means nothing unless the cost is shifted to the homeowner and away from taxpayers) and I’ve heard of proposed 1 year, 2 year, and 5 year extensions. Knowing Congress, House will push for shifting more onto homeowners and Senate will seek more Government involvement. Source: http://www.reuters.com/article/2012/05/02/us-usa-insurance-flood-idUSBRE84115S20120502

2-20-2012:  Flood insurance rates are rising and will be a shock to some homeowners unprepared to be required to get flood insurance.  Changes in drainage and construction around your neighborhood may cause changes in how water collects or dissipates on your property.  New flood designations will go into effect as of October 2012.  Source:  http://mdjonline.com/view/full_story/16433354/article-Residents-assess-need-for-insurance-against-flooding?instance=secondary_story_left_column

12-14-2011:  Well, the Federal Flood Insurance Program is on life support for now and Congress is still talking about elimination of the Federal Flood Insurance Program…what do you think ought to happen about a program that resulted in about $11 Billion in losses in 2011?  Source:  http://www.upi.com/Business_News/Real-Estate/2011/12/14/Will-Record-Flood-Losses-Save-or-Drown-Flood-Insurance/3201323876248/

Do you think the Federal Government should be insuring US households with insurance it charges people, or should it be privatized or partially privatized?

9-16-2011:  Currently, the National Flood Insurance Program (NFIP) is set to expire 9-30-2011 (but don’t count on it).  Also, due to past & recent storms and close to $20 billion shortfall in National Flood Insurance Program resources, there are separate bills in the US Congress proposing increases to flood insurance premiums from 15-20%.
Source:  http://www.retradio.com/shows/2011/09/16/national-flood-insurance/

9-15-11:  Some estimates of flood insurance premiums from floodsmart.gov – http://www.floodsmart.gov/floodsmart/pages/residential_coverage/policy_rates.jsp

9-15-11:  Less than 10% of people who were flooded in the path of Hurricane Irene carried flood insurance.  This article also has other good insurance suggestions including an annual review of your policy with your insurance agent.  Source: http://realtytimes.com/rtpages/20110915_residents.htm

5-23-2011:  Another Cspan Washington Journal segment on National Flood Insurance Program.  I found it interesting to learn that “every” real property in the United States is in a flood zone, just some don’t require flood insurance. Cspan Washington Journal discussion about flood insurance 5-23-2011

5-10-2011:  Operation Watershed by the Army Corps of Engineers for 2011

Update 3-28-2011: National Flood Insurance Program (NFIP) established in 1968, is a Federally backed insurance program that insures homeowners who (a) are located in a flood zone who (b) have a Federally backed loan – which nowadays is about 100% of loans issued.  That makes me ask the question: Now that Fannie and Freddie are owned by the US Government, can they require homeowners to purchase flood insurance?

Note:  Watch the Cspan Washington Journal 3-28-2011 program for a nice 40 minute summary – http://www.c-spanvideo.org/program/NationalFlood)

Given the recent floods in Georgia and around the country, is flood insurance on your radar?

Many people are now considering flood insurance for their homes.

The Federal emergency Management Agency (FEMA) is charged with the task of maintaining, and constantly revises, National flood maps. I understand that if any portion of your land is connected to a flood area/zone, then your property is suspect and may require flood insurance by your lender no matter what stage your loan is in. (Yes, lenders are made aware of changes and may suddenly require you to order flood insurance). If you don’t have a mortgage, then you should consider monitoring your property’s flood zone/area status.

Your current lender may refer you to, or be able to order a Flood Certification from a company that reviews your property on the FEMA flood maps. FEMA posts a list of Flood Certification companies FEMA’s list of flood certification companies or members of the National Flood Determination Association NFDA – http://www.fema.gov/business/nfip/fzone1.shtm

The flood reviews are ordered by lenders for new or refinance loans and typically cost around $20.

I understand that the average National Flood Insurance Policy costs about $350 per year (even though this is heavily subsidized by the Federal Government). If the actual structure of your residence lies anywhere in a flood zone/area, your lender will require flood insurance. Before an amount is determined, you may need to get an elevation survey to determine how much of the dwelling is located with the flood zone/area, which may cost a few hundred dollars.

Search here to find your property in the FEMA flood maps – http://msc.fema.gov/webapp/wcs/stores/servlet/FemaWelcomeView?storeId=10001&catalogId=10001&langId=-1

Please post the experiences you or others you know who have encountered the flood insurance issue.

References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.

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