Intero Pride Real Estate
During a recent transaction I encountered a situation that required the home to have flood insurance for financing. There was some confusion regarding the flood zone and even though the buyer opted to obtain an “elevation certificate” he was still required to have flood insurance. Properties that require flood insurance are often considered undesirable to buyers due to the extra cost but in this case the buyers desire to be in this particular neighborhood surpassed the discomfort of an increased insurance premium.
FEMA (Federal Emergency Management Agency) is an agency of the United States Department of Homeland Security. The agency’s primary purpose is to coordinate the response to a disaster that has occurred, such as flooding. They also publish maps of areas that are subject to potential flooding. If you are in the process of purchasing a home, one of the ways to determine if the property is in an area of potential flooding is through a Natural Hazard Disclosure Report that will be ordered by your Realtor. This report contains a variety of information regarding environmental hazards such as flood, fire , abandoned mines, and more. This information is used by your lender and insurance agent to determine the type of insurance you will need for your home.
Normal home owners insurance does not cover losses due to flood. Flood insurance reimburses the homeowner for all covered losses up to $250,000 for the building and $100,000 for contents. For renters, there is flood insurance available that will pay up to $100,000 for personal belongings. Typically there is a 30 day waiting period from the date of purchase before the policy goes into effect.
Federal Disaster assistance is also available but only if the President declares the area a disaster area. Less than 50% of all flooding incidents are declared a disaster. Another important thing to consider is that any funds received are normally in the format of a loan that must be repaid with interest.
On March 21, 2014, President Obama signed the “Homeowner Flood Insurance Affordability Act” into law. This law repeals FEMA’s authority to increase premium rates at the time of sale or implementation of a new flood map. It will refund the excessive premium to those who purchased a property before FEMA warned them of the rate increase. The bill limits premium increases to 18% annually on new properties and 25% for some older ones.
If you have any questions or concerns about your homeowners insurance, contact your insurance agent. If you are a homebuyer currently in search of a property, information regarding flood zones or other hazardous areas are available to you through your Realtor.
If you have any questions I can assist you with, please contact me at firstname.lastname@example.org or call 530-681-2532.■