A new report details the cost and extent of one of the worst years for floods in recent history.
CoreLogic estimates flood losses in the U.S. this year at approximately $10.67 billion, three times the amount forecast for next year, based on various flooding and storm events recorded in the National Climate Data Center.
CoreLogic suggests that flood insurance coverage to be expanded to protect more territory. The floods of 2011 heightened awareness of the flood risk outside of the FEMA 100-year flood zones, the report states. There has also been an emphasized need to raise current flood protection standards for the critical and strategic infrastructures in the U.S.
Based on the trend pattern, 2012 should not be an extreme flood year – in fact, there should be several more years before the next extreme flood loss year. U.S. flood loss in 2012 is projected at approximately $3.53 billion.
Before the federal program was launched in 1968, few private carriers provided flood insurance because of the cost and destructive power of floods. Under the program, homeowners in FEMA flood zones are required to buy policies from insurance companies — about 90 provide it — and the government pays for flood damage with federal funds collected largely from homeowner premiums.
This year's big losses could drive the program further into the red, or it could underscore the need to continue and possibly expand the program to protect property that does not qualify for coverage today.
Do you have flood insurance? We'd love to hear how you feel about the federally funded flood insurance program. Is it too costly for our government to continue funding, or do you think it's something our government should offer at whatever the cost? Click the comment link below and tell us what you think.
Homeowner's insurance can be a bit complicated. One of the best ways to make the most of your homeowners insurance is to have an up-to-date home inventory of your personal possessions.
You can also better protect yourself by knowing what's covered and what's not.
Here are the five most common misconceptions about homeowners insurance:
- Damaged items are replaced at cost. When surveyed, most policy holders did not know the difference between cash value vs. replacement cost. Actual cash value refers to the amount it takes to repair or replace a home's contents after depreciation. On the other hand, replacement cost pays the amount actually spent to repair or replace the property. Replacement cost coverage for your personal items is included in some policies, but if your policy does not provide the coverage, it is typically available at an additional cost.
- Flood damage is covered. Not true. Most standard homeowners policies do not cover damage sustained by floods, even though 33 percent of policy holders think otherwise. Be sure to check your policy's limits, and get flood coverage if you think you're at risk.
- Mold damage is covered. Not true. Like termite infestation, mold damage is generally not covered under the typical policy, although some policies cover a limited amount of mold damage if the damage is the result of a covered water loss. Take measures to reduce your risk by:
*Moderating your home's humidity level.
*Check for damp walls or carpets that could serve as mold breeding grounds.
*Repair water leaks promptly.
*Replace washing machine hoses on a routine basis to avoid accidental leakage.
*When leaving your home for an extended time, turn off water and drain pipes.
- Sewer backups are covered. Not true. Sewer backups are generally excluded from most policies, but some companies offer extra coverage for damage caused by water or sewage which backs up from off the homeowner's property.
- Earthquake damage is covered. Not true. As with floods, standard insurance policies generally don't cover earthquake damage, so if you feel your house is at risk, you may want to purchase a separate Earthquake endorsement to make sure you're protected.
If in doubt, ask! Check with your insurance provider BEFORE disaster strikes and you find out you're not covered for that.
The House of Representatives passed yet another short-term re-authorization of the National Flood Insurance Program. The most recent extension will keep the program going through November 18. This is just the most recent in a series of short-term extensions to the NFIP. Apparently there are legislative efforts to extend the program for the next five years.
No bank will lend on a property in a flood-prone area without flood insurance. So when the NFIP lapses (as it did last year), it makes it nearly impossible to sell a home in a flood area, and any scheduled sales are held up due to the lack of insurance. Regardless of whether it makes sense for the government to encourage people to build homes in a potential flood zone is a separate issue, because these houses already exist and are dependent upon the NFP. This is the system we are largely stuck with.
In light of this, some groups, such as the National Association of Realtors (NAR), are advocating for a long term extension of the NFIP. In a press release, the NAR stated that "the NAR strongly supports the NFIP and believes that a 5-year extension of the program's authority to issue flood insurance is essential to a properly functioning real estate market".
There really is no excuse for Congress not to extend the NFIP as the many real estate transactions are utterly dependent upon it. Since 2002, the program has been allowed to lapse 11 times, and then retroactively re-authorized.
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.
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