Compared to selling other types of properties, selling a property in a flood zone is always more difficult. These properties are located in areas that FEMA considers high risk due to their risk of flooding and low elevation. If a property is located in a flood zone, FEMA estimates that there’s a twenty five percent chance that the property will be flooded in a span of the standard three decade mortgage.
Help Your Client Sell Their Home in a Flood Zone
What this means for the buyer is that they’re going to have to pay extra for flood insurance which is generally a bit more costly compared to the standard homeowners insurance policy. Depending on where the property is located, there are cases when finding affordable flood insurance is just not possible. Add to that, the extra costs typically involved in buying a home and purchasing property located in high-risk areas can feel unattainable and overwhelming. As a seller’s agent, buyers need to be fully aware of the specific challenges involved in flood zone houses so they can effectively keep every party involved in the process moving towards the closing table.
Here are some of the most common challenges you and your customers will most likely face when it comes to selling a property in a high risk flooding zone.
Challenges to Selling a Property in a Flood Zone
If you want to sell your property that’s located in a high risk flooding area, the buyers need to consider buying extra flood insurance. This can end up costing them 1000s of dollars per annum, meaning that the cost of owning the property will significantly increase over the years.
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Many banks require buyers to purchase comprehensive flood insurance, which is not only a lot more costly, but also harder to find. Subsidies for the NFIP were reduced in 2012 while insurance rates have increased by up to twenty five percent. What this means is that in the next few years the cost of flood insurance premiums may end up being up to four times higher.
Legislation to bring back subsidies to cushion the cost of premiums has been stalled in Congress, making it very difficult for sellers to estimate how much potential buyers may end up paying for their insurance premium.
The Responsibilities of Sellers for Flood Zone Property Sales
Full disclosure is the main responsibility for sellers who want to sell their property. This information can also be found on the internet and it’s regularly updated. To check the floodplain maps in your area, all you need to do is go to FEMA.gov.
It is highly important that your client’s listing price reflects the extra costs that purchasing flood insurance for the property will create. This is very important if you want to make your client’s property competitive with other properties that aren’t located in a high risk flood zone.
Methods for Selling a Property in a Flood Zone
Even though there are many challenges associated with selling property in a high risk flood zone, that doesn’t mean you cannot sell yours.
Below are the top 4 methods you can use to help your client sell his property, while putting the buyers at ease.
Reduced insurance costs for a year. You can show good faith to potential buyers by offering them a discounted insurance cost for a year from the buying price. Doing so can convince them to purchase the property and help prepare them for next year’s flood insurance premium bill.
Prove to the buyers the risk is minimal. If the area hasn’t been flooded for a year and the sellers never had to pay a claim for flooding, be sure to request a report from the CLUE and show it to potential buyers.
Make the required improvements. In case the property is just a few inches outside of a flood zone, then your client may want to elevate the property outside the floodplain. He can do so by using pilings. Sure, it’s a time consuming and costly process, but if they’re having a hard time selling the property, this method can be well worth it.
Challenge the flood zone designation. If you think that the home shouldn’t be categorized as high risk, then you can instruct your client to appeal through FEMA in order to remove the designation. Decisions can take up to 60 days.
Flood Insurance Rate Changes for 2017 (in Layman’s Terms)
The National Flood Insurance Program has released rate changes for new & renewal policies beginning April 1st, 2017. We’ve put together some bullet points that will help you easily decipher the expected premium changes and what this means for your flood policy. If you are purchasing a home, and have (or will have) a flood insurance policy, here’s what you can expect.
Flood Premium Increases Overview
Flood insurance rates will increase from an average of approximately $830 per policy to $880 per policy in 2017. This represents an average increase of 6.2% for the entire program.
The largest increases of 25% will apply to homeowners that are located in flood zone AE, are Pre-Firm (homes built before 1975) and meet the following criteria:
Non-Primary Residences (Secondary Homes & Rental Properties)
Substantially Damaged Properties- 50% or more of value claimed in a prior loss
Severe Repetitive Loss Properties (SRL)- 4 or more minor flood claims (over $5,000) at one location in 10 years or 2 major flood claims (exceeding value of property) for lifetime.
If your home was built before 1975, has not been substantially improved and fits into one of the four categories above, you can expect rate increases of 25% per year until full rates are reached.
Pre-FIRM (Built before 1975) Primary Residence Flood Zone AE Increases
Generally speaking, If your home was built prior to 1975 and does NOT meet the above 4 criteria, and you’re located in flood zone AE, your premium increases will be limited to 18% but must increase by at least 5% annually.
Flood Zone X
If your property is located in Flood Zone X & you have a Preferred Risk Policy (PRP), like the majority of Long Island New York homeowners that own a house NOT located on the water, you can expect premiums to remain unchanged in 2017.
Standard-Rated Policies- Premiums will increase 2%, with a total increase of 1%
Preferred Risk Policies (PRP’s)- Premiums will remain unchanged
The majority of New York homeowners will experience a premium jump, on average, of approximately 6%, unless your home has been substantially damaged or has experienced multiple losses.
This guide gives a general overview and does not include probation surcharges, FPF, and Congressionally-mandated HFIAA surcharges that are not considered premium and, therefore, are not subject to the premium cap limitations. In some cases, homeowners may experience premium rate increases in excess of the cap limitations of 18%.
Do you own a home that doesn’t fit any criteria listed in this article? Have a flood insurance question? Give us a call (631-782-3175) to speak with one of our New York State licensed flood insurance specialists or fill out our Flood Insurance Form to get competitive rates today.
Insurance is required in order to cover not only your liability to others, but also your personal belongings, your property’s structure and the cost of extra living expenses in the event your property is damaged and you need to live in a hotel until it’s repaired.
It’s important to get adequate insurance in order to cover the cost of having to rebuild your home in case it’s destroyed. Make sure that you don’t base the rebuilding cost on the amount you paid for your property, that the coverage is enough to cover current construction costs and that you do not include the cost of the land.
To calculate exactly how much insurance you require, you should multiply the local building costs by the total square footage of your property. To learn more about how much the builders in your area may charge for rebuilding your home, be sure to get in touch with them as soon as possible. If you want, you can also call your insurance agent or local real estate agent and ask them for some advice in this regard.
Top factors that determine your property’s rebuilding cost:
How Much Homeowners Insurance do I need?
Whether parts of your property or the property itself were custom built.
Arched windows, exterior trim, fireplaces, etc.
Roof type and materials used for it.
Number of rooms and bathrooms.
Your property’s style.
The type of exterior wall your home has.
The structure’s square footage.
Local construction costs.
Changes to your home, such as enlarging the bathroom or adding a second bedroom, etc.
If you already have a typical homeowners insurance policy, then it protects you from disasters like theft, explosions, hail, but also lighting and fire. On the other hand, damage that results due to poor maintenance, earthquakes and floods is not covered.
Liability to others
Depending on your policy, it may also include coverage for property damage or bodily injury, meaning that you are protected from losses in the event your family members, you personally and even your pets, cause damages to other individuals. The policy covers the cost for the damages a court may rule you to pay and the cost of defending you in court as well.
A standard homeowners policy provides at least one hundred thousand dollars worth of liability insurance.
Extra living expenses in the aftermath of disasters
By having a standard homeowners insurance policy, you’re going to be covered for any expenses made towards your relocation and that of anyone living in your home after it was destroyed or made uninhabitable after a disaster. Some of the costs covered include restaurant meals, hotel bills and a wide range of other living expenses.
In general, the amount of extra coverage for living expenses varies from insurer to insurer, but the majority of polices provide about twenty percent of the total amount of insurance you have on your property. If you’re lucky, then you may find that there are certain companies offering unlimited coverage under such circumstances, but only for a certain amount of time. In case one or more rooms of your home were rented out, then this policy will also pay you for loss of income.
Using endorsements/floaters to insure high-value items
There are certain types of items that your insurance policy may cover up until a certain limit (usually one or two thousand dollars) some examples include furs, silverware and jewelry. If you own laptops or computers in general, then some insurers may also place a certain limit on the amount they’re going to pay for them.
For some people, these limits are low, but don’t worry about it, since you can purchase a special endorsement or personal property floater (they come with no deducible). By getting one, you can easily insure your items as a collection or individually. So basically, you’re going to have to pay a premium that’s calculated based on where you live, the item’s dollar amount and item type.
Actual cash value vs. Replacement cost
If your home or belongings are insured for their cash value, then the policy will pay to replace them within the limits of your policy. Depreciation is also going to be factored in the total cost. However, you can also choose to get a replacement cost policy, meaning that you’ll be paid the cost of replacing your belongings or property within the limits of your policy.
Let’s say that you have a TV which is destroyed after it falls off the wall. If your policy is an actual cash value policy, then you’re going to receive a partial payment from the insurer, since your TV is already old and used. If you’ve purchased a replacement cost policy, then the insurer is going to pay you to have your TV replaced with a brand new model.
In terms of cost, the price of a replacement cost coverage policy is approximately 10% higher compared to its counterpart.
Your personal possessions
The majority of standard homeowners insurance policies cover the loss or destruction of your belongings for about fifty to seventy percent of the total insurance you have on the dwelling or structure of your property.
However, it’s recommended that you carefully determine the value of your belongings to see if the policy provides adequate coverage. If you realize that you do indeed require extra coverage, then make sure to get in touch with your insurance agent as soon as possible.
Replacement cost policies may not be available to those owning an older property and therefore they may need to purchase a modified replacement cost policy. However, keep in mind that features typical to older homes are only going to be replaced or repaired using current building techniques and materials.
It’s important to keep in mind that each insurer has its own ways of insuring older properties. So while others refuse to insure the property for its replacement cost, some will do this as long as they deem the home’s condition to fall within their standards.
In the event you aren’t able to insure your home for its replacement cost or the cost of replacing it is very high, then you may be able to replace it with a home of similar size as long as the coverage provided by your insurance policy allows you to.
If your policy has an inflation guard clause, then this helps automatically adjust the property’s limit upon renewing your policy, so that it reflects actual construction costs in your particular area.
It’s very well known that building codes can change fast and without notice. This means that if your property needs to be rebuilt, then it needs to meet the standards imposed by the new building codes. Usually, a guaranteed replacement cost policy and also your typical homeowners insurance policy won’t cover the extra costs associated with the new building codes. However, some insurers may provide a Law or Ordinance endorsement that may cover part of these costs.
Extended replacement or guaranteed cost coverage
In the aftermath of a tornado or a hurricane, the services of construction companies are in high demand. Because of that, they may increase their prices, meaning that your homeowners policy may not be enough to pay for the necessary repairs. To ensure you never find yourself in such an unfortunate situation, you should purchase a policy that pays above the standard caps of your current policy.
By opting for an extended replacement cost policy, you’re generally going to receive up to twenty percent more money compared to your initial policy’s limits. However, if you have a guaranteed replacement cost policy, then the insurer is going to pay you as much as it’s needed to rebuild your home exactly the way it was before disaster struck.
Excess liability or umbrella coverage
If you want to effectively protect your assets, then you should purchase an adequate amount of liability insurance. Some people’s property and/or possessions may be worth more than their policy’s limits, in that case they should purchase an umbrella policy.
This type of coverage provides them with a lot more coverage and they’re usually going to kick in after your liability insurance has been exhausted. Keep in mind that this type of coverage is separate from the standard homeowners insurance policy and as such, it constitutes a separate purchase. On top of providing you with greater coverage, it can also protect you from invasion of privacy, slander and libel. As you may very well know, these are not included in a standard car policy or homeowners policy.
Last but not least, you should know that the cost of your umbrella policy is determined by the type of risk you represent and the amount of underlying insurance you have. If your underlying liability coverage is higher, then you’re going to pay less for the policy. The reason for that is because this way the chances of requiring the extra insurance are low. If you own a vehicle or a home, then the majority of insurers require that you have at least 300 thousand dollars in primary liability coverage.
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Easily lower your monthly insurance premium with these 6 useful tips
When you sign up for a new insurance policy, the insurer or their agent are going to ask you a few questions in order to see what discounts you qualify for. However, when it’s time to renew your policy, they won’t recheck your discount eligibility, so it’s up to you take care of it. The good news is that in most cases, getting affordable insurance is not as hard as you think and if you have good credit, then that may be enough for some companies to approve your application. There are of course many ways you can consider to save money when looking to buy a home insurance policy and on some of them we’re going to focus below
Six Easy Ways to get Cheap Home Insurance quotes
1. Safeguard your home from potential disasters
Plenty of people live in areas that are at risk for various types of disasters, including tornadoes, hurricanes and floods. However, if you do take a few steps to help protect your home from them, then your insurer may reward you with a much lower monthly premium. As far as the discounts go, you can get up to thirty percent off if your property is fortified according to insurance standards.
Some examples of what you can do in order to fortify your property include pruning trees away from your property, but also sealing the roof beneath the shingles. By taking these steps, you can easily qualify for a discount that can save you some pretty good money in the long run.
2. Having good credit is important
If you plan on taking out a mortgage then having good credit can help you qualify for a low interest rate. On top of that, it may also reduce your home insurance premium.
Before approving you for an insurance policy, most insurers check your credit score to gauge the risk they expose themselves to if they eventually decide to welcome you as a customer. What do insurers actually look at? Well, it seems that it depends with each company. If you’re married, then the insurer is going to check both your credit score and that of your spouse and then give you a quote based on the best one out of the two.
3. Stay with the same insurer for as long as possible
The majority of insurance companies are willing to offer you various discounts if you decide to renew your policy with them. Customers who renew their policy with the same carrier can save between five and ten percent a year.
4. Install a state of the art alarm system
A lot of us are aware of the fact that by installing a burglary system, carbon monoxide sensors and fire alarms we can easily minimize the cost of our insurance premium. However, if the system you have in place also alerts the police or the fire department when it goes off, then you can really bargain with your insurer to give you a great discount on your insurance policy. In general, you can save up to 10% if your home does feature any of these types of alarm systems.
There are companies that claim you can save up to twenty percent and sometimes even more. So if the main reason you plan on buying an alarm system is to reduce your monthly insurance premium, then you should speak to your insurer in order to see just how much you can save.
5. Increase your deductible
If you can handle a higher level of risk, then you can furthermore save money on your monthly premiums by selecting a high deductible policy. For instance, if until now you had a deductible of five hundred dollars or maybe a thousand dollars, then how about you increase it up to ten thousand dollars? Remember, only consider this if you can afford it and if you can, then you can save up to thirty five percent on your insurance policies.
6. Purchase at least one policy from the same company
If you didn’t know, when people get more than one insurance policy from the same company, they can actually save some good money in the long run. What this means is that you should consider buying your car insurance and also your home insurance policy from the same company to save up to thirty percent of the total cost.. On top of the lower overall cost, you’re also going to find it a lot easier to receive communication and file claims given the fact you only have to deal with a single company.
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Having one or more rental properties is a great way to make a great income at the end of the month. However, you do need to have Landlord Insurance for them to protect yourself from various types of risks. If you plan on buying property and then renting it for a profit, then you should certainly think about getting landlord insurance. This is absolutely necessary and in most cases, it’s even mandated by the law
Prior to getting insurance for these properties let the insurer know if your dwellings are furnished and provide them with as much info as possible to ensure you get the right amount of coverage for them.
Why getting landlord insurance is important
Purchasing landlord insurance for your rental property
Getting landlord insurance is not only going to protect your rental unit or home, but at the same time it also provides you with plenty of coverage in the event someone files a lawsuit against you (as a landlord).
What’s great about landlord insurance is that it covers everything in your home, but also features liability coverage which protects you in the event of judgments or lawsuits. If you already have a homeowners insurance policy, then you’re probably aware of the fact that the coverage it offers is extremely poor by comparison.
It’s important that the rental home insurance provides adequate coverage for your property. Before you agree to a specific policy, you need to ensure that the agents carefully calculate the cost of each good (including washing machines, computers, laptops, refrigerators and so forth) in your home in order to be aware of its replacement cost should it get damaged after you’ve already purchased the policy.
Keep in mind that this type of coverage doesn’t include the land on which your property stands on. Be sure to also keep in close communication with the agent in order to let him know about any particularities regarding your hardwood flooring, ceramic tiles or porch that may impact their replacement cost. If your property is empty, then the coverage amount for such items should be kept as low as possible.
If along the way you may decide to buy a refrigerator, a stove and other similar goods be sure to speak to your insurance agency about it so they can update your coverage accordingly.
If your property becomes inhabitable due to a covered loss, then the insurance should cover you. Consequently, if your home is damaged to the point it’s deemed unlivable or is destroyed, then the policy needs to cover you for loss of income.
Rental Property Insurance needs to also provide you with landlord liability protection. As a landlord, you’re certainly not going to be around your property 24/7 and this means that over time, issues that you’re not aware of can slowly develop to the point where they cause significant amounts of damage to your property, even though you had nothing to do with them. In this case, it’s best that you purchase umbrella coverage. What’s great about it is that it provides you with a lot more coverage than a standard landlord insurance policy.
In general, many tenants think that landlords are very rich and because of that, if they get injured in your property, then they are generally going to file claims and demand substantial amounts of money from you. To avoid that, ensure that your property is inspected at least once a year.
Getting Rental Home Insurance for your basement apartment
Anyone who plans to rent a basement apartment or maybe a part of their house should first of all get in touch with their insurance agent about it. If your home has multiple entrances, then you may have to buy a policy for it. Therefore, it’s best that you get in touch with your insurer in order to learn more about the best type of policy you can purchase for your property.
Claims under your landlord insurance
If your home is damaged or destroyed as a result of an explosion, water damage, fire damage, etc, then you should get in touch with your insurer as soon as possible. Make sure that tenants are evacuated from the building and that all your belongings are also removed to prevent further damage to them. To help calculate your losses, you need to provide your insurer with a copy of your lease or any other types of documents that may assist this process.
On top of that, you should also get in touch with various home repair services in order to get quotes for repairs. In order for the repairs to being right away, you also need to keep your insurance adjuster updated on these matters.
If your tenant informs you about a possible danger at your rental unit, you should immediately address it. In fact, if you do nothing about it, then you could end up paying tens of thousands of dollars in the event the tenant sues you. If someone already filed a lawsuit against you for injury or damage that took place in your property, then you should seek the services of an experienced lawyer.
Don’t forget to also ask about the personal injury protection coverage which usually provides coverage for wrongful eviction, slander and libel.
At the end of the day, for a small monthly premium, you can have the peace of mind that you’re fully covered if something unexpected may happen to your property and/or your tenant.
Welcome to the Coastal Insurance Video Library. Here you will find helpful video’s explaining everything from, how to save money on Homeowners Insurance to an easy explanation of Flood Insurance. Call today (631-782-3175) to speak with one of our underwriting experts. Fast Quotes, A.M. Best Rates & Free Advice.