Massachusetts flood insurance

Flood Insurance Super-Storm To Hit Oct. 1, Premiums To Surge

by Rich Vetstein on September 13, 2013

flood-insurance-new-bedford-guideNew Flood Insurance Rates and Map Changes To Drown Homeowners With Premium Surge, Subsidies To End 

I was recently working on a sale transaction in Wareham which went under agreement with no issues. As is common in that coastal area, the property is in Flood Zone with a subsidized flood insurance annual premium of around $3,000 which the buyer was willing to live with. However, during the underwriting process, the lender advised that under new federal flood insurance map and rate changes, the property was not only in a higher flood risk elevation zone, but would also lose its subsidy upon a sale, with a new premium running a whopping $55,000 — a 1700% increase! Needless to say, the sale sank to the bottom of Buzzards Bay, and the current owner is left with a significantly devalued property.

The culprit for this storm surge is the Biggert-Waters Flood Insurance Act, which was passed after Hurricane Katrina. Under the new law, many homeowners will grapple with a double-whammy of costs — first, because their homes are no longer above base flood elevation, and second, the Act will eliminate the grandfathering of properties that were allowed to use old flood-risk data, and will end subsidies for certain types of properties. According to most projections, flood insurance premiums have the potential to increase by 25% per year for many, and for some, exponentially — like my Wareham client. Furthermore, many additional homes have been placed in the high-risk flood zone for the first time, and if the owners have mortgages, they will be required to buy flood insurance.

According to the Boston Globe, the changes will have widespread impact along coastal communities. For example, in Marshfield, roughly 1,500 homes are located in the expanded flood zone, and in Scituate, about 500, according to local officials. Coastal towns have been scrambling over the last several months to assist affected homeowners and petition Congress and FEMA to help, mostly to no avail.

Property owners have the right to appeal their inclusion in the flood zone, but they have barely more than six weeks left to do so. The deadline is Oct. 17 throughout the county. For an appeal to be successful, the owner would have to prove, with professional documentation, that the elevation is different from what the maps indicate. That’s a high burden and very costly to boot.

This situation has real potential to drown listings and sales along the affected coastal areas. I’ll be monitoring this looming storm in the weeks ahead. Stay dry!

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We are pleased to have yet another guest blogger: Debra McPhee, CIC, CPCU, Owner of Suburban Insurance Agency of Holbrook, MA, and a very qualified Massachusetts Flood Insurance Agent. Debbie is here to write about flood insurance, a timely topic given the recent March floods.

A flood can devastate your home and your financial security. Any flood—even a small one—can cause thousands of dollars in damages.  Even homeowners in low to moderate-risk zones are at risk. Up to 25% of all flood claims come from people living outside high-risk zones.

Flooding happens anywhere including right here in Massachusetts. Just recently, floods hit nearby towns. People discovered the hard way that when it comes to floods, no one is safe.  You don’t have to live near a major waterway to be flooded. Sudden severe storms can cause flooding. Just because it has never flooded in your area, doesn’t mean it won’t.

You might think that your Homeowners insurance covers flooding, but it doesn’t. It covers all kinds of things, but not flooding.  Flood insurance gives your home that crucial layer of protection your Homeowners insurance doesn’t provide.

What Is The Definition A “Flood”?

In simple terms, a flood is an excess of water on land that is normally dry. Anywhere it rains, it can flood.  A flood is a general and temporary condition where two or more acres of normally dry land or two or more properties are inundated by water or mudflow. Many conditions can result in a flood: hurricanes, broken levees, outdated or clogged drainage systems and rapid accumulation of rainfall.

Myth: Flood Insurance Costs Too Much

You might be surprised how inexpensive it is. The average flood insurance policy costs less than $570 per year. Most homeowners live in a moderate-to-low risk area and are eligible for coverage at a preferred rate with building and contents coverage for one low price. In fact, building and contents coverage starts at just $119 per year. If you live in a high-risk area, a standard rated policy is the only option for you. It offers separate building and contents coverage.  If your home is in a high-risk flood area and you have obtained a mortgage through a federally regulated or insured lender, you are required to purchase a flood insurance policy.

How to Purchase Flood Insurance

Flood Insurance is written through the National Flood Insurance Program (NFIP), a federal program authorized by FEMA.  Flood insurance is available to homeowners, renters, condo owners/renters, and commercial owners/renters. You need to contact a Massachusetts Flood Insurance Agent for a quote and/or application (all policies written by the NFIP are written through insurance agents).

Typically, there’s a 30-day waiting period—from the date you purchase the flood insurance—before the policy goes into effect. The waiting period, however, does not apply to a new home purchase or refinancing of a mortgage if the mortgagee requires flood insurance.

What is Covered by Flood Insurance – and What’s Not

The following is a summary of items covered and not covered by flood insurance.  For specific details as to what is covered, you have to refer to the actual policy.Massachusetts flood insurance agent

What’s covered under Building?

  • The insured building and its foundation.
  • The electrical and plumbing systems.
  • Central air conditioning equipment, furnaces, and water heaters.
  • Refrigerators, cooking stoves, and built-in appliances such as dishwashers.
  • Permanently installed carpeting over an unfinished floor.
  • Permanently installed paneling, wallboard, bookcases, and cabinets.
  • Window blinds.
  • Detached garages for up to 10% of the building limit; other detached buildings require a separate Flood policy

What’s covered under Personal Property?

  • Personal belongings such as clothing, furniture, and electronics
  • Curtains.
  • Portable and window air conditioners.
  • Portable microwave ovens and portable dishwashers.
  • Carpets not included in building coverage
  • Clothes washers and dryers.
  • Food freezers and the food in them.

What’s never covered by flood insurance?

  • Damage caused by moisture, mildew, or mold that could have been avoided by the property owner.
  • Currency, precious metals, and valuable papers such as stock certificates.
  • Property and belongings outside of a building such as trees, plants, wells, septic systems, walks, decks, patios, fences, seawalls, hot tubs, and swimming pools.
  • Living expenses such as temporary housing.
  • Self-propelled vehicles such as cars, including their parts.

    Debra McPhee, CIC, CPCU

Limitations to coverage in a basement

  • Coverage in a basement is very limited. It includes cleanup expense and items such as furnaces, water heaters, washers and dryers, air conditioners, freezers, utility connections, and pumps.
  • There is no coverage for the contents of a finished basement and improvements, such as finished walls, floors, and ceilings.
  • Personal property located in a basement is not covered.

Please call me, Debra McPhee, CIC, CPCU at Suburban Insurance Agent at 781-767-3300 and let’s talk about your flood insurance needs. Don’t let a flood wash away your financial future.

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