Flood insurance?

[indysteel]

When my husband and I bought our house in 2009, we choose an area that is more or less halfway between my job and his. Unfortunately, it's a town that's prone to flooding. There was a rather bad--the proverbial 100-year flood--flood in 2008 spelled disaster for many in our town. The house we bought sits on slightly higher ground and fared just fine, but several of our neighbors didn't fare so well. A difference of 5 to 10 feet of elevation in our area makes a world of difference. We had some flooding this past weekend in our neighborhood and we, again, fared just fine thanks to a very busy sump pump and our extra elevation.

But here's a picture from 2008 of what it looked like to the south and west of our house in a lower lying area:

http://farm4.static.flickr.com/3049/...e3f594fc85.jpg

I had previously been working on the incorrect assumption that our mortgage lender would have forced us to get flood insurance if we were eligible for it in the first place (not everyone can buy federal flood insurance, and that's the only kind of flood insurance out there). Wrong. You're only required to get flood insurance if your loan is federally backed, e.g, FHA, VA. Ours is not. So, while we weren't required to get flood insurance, we are eligible for it--at a premium of about $1600 a year. So, now my husband and I need to decide whether to carry it.

I can swallow the cost, although it pains me to do so. What keeps stopping me in my tracks is that it's federal insurance. I may work for the Feds, but when I hear how other disasater programs are run, I have to wonder whether they pay out in an expeditious manner when the claim is against the federal flood insurance program. Will I pay close to $2000 a year only to be thwarted with red tape and bureaucracy? Is that still better than the alternative?

Does anybody carry flood insurance and, if so, have you ever made a claim? How was the claim handled? Anything else I should know? Any other thoughts?

[OakLeaf]

We have flood insurance, but have never made a claim. We're not required to carry it, but being two or three feet above the flood plain in coastal Florida, there's no way we were going to decide against it. The bonus is that because we're not in the flood plain, it's cheap.

Honestly, from what I know about it, most of the problems stem from it being a program that has to coordinate with private homeowner's insurance with each of them only being liable some of the time. It's like when you have trouble with your phone, and the company that owns the infrastructure says it's the service provider's issue, and the service provider says it's a problem with the wires. The claims issues have little or nothing to do with it being a federal program - look at Medicare, for comparison.

(And plenty of private mortgage lenders *do* require flood insurance when you're in the flood plain - just as they require termite certification - I'm as surprised as you are, that yours didn't.)

[indysteel]

We have flood insurance, but have never made a claim. We're not required to carry it, but being two or three feet above the flood plain in coastal Florida, there's no way we were going to decide against it. The bonus is that because we're not in the flood plain, it's cheap.

Honestly, from what I know about it, most of the problems stem from it being a program that has to coordinate with private homeowner's insurance with each of them only being liable some of the time. It's like when you have trouble with your phone, and the company that owns the infrastructure says it's the service provider's issue, and the service provider says it's a problem with the wires. The claims issues have little or nothing to do with it being a federal program - look at Medicare, for comparison.

(And plenty of private mortgage lenders *do* require flood insurance when you're in the flood plain - just as they require termite certification - I'm as surprised as you are, that yours didn't.)

Thanks for chiming in. I'm extremely surprised our lender didn't require it, especially with what happened in 2008 being so fresh in everyone's minds (our original and refi lenders are local banks). Granted, our original lender is a division of a bank that was later taken over by federal regulators, too, so hmmmm.

Since we live in a "high risk" area, we aren't entitled to a "preferred" rate, as it appears you are. I tend to think that we'll likely get it because it just seems like the best thing to do. Obviously, there's risk either way, but the downside of not having it could be huge. In looking for pictures of what our neighborhood looked like in 2008, I was reminded how bad the flood was and how immediate its ruination. Lots of families had to move out immeditely and never got to return. The house just three doors down from ours is no longer there. The town is still in the process of tearing down the abandoned homes. Only a few were salvaged to the point of being habitable.

[jessmarimba]

I don't have it and I've never lived somewhere that did.

But for future reference, anyone who wants to check their property can look here - just enter your address and zoom in on the map.

The problems I remember from Katrina flood insurance issues were that FEMA was claiming the water damage wasn't from flooding but from the wind, etc. I would say if you aren't in danger of hurricanes, filing a claim should be fairly straightforward.

[withm]

Ugh. I have flood insurance. Never had a claim but that day could come any time. I live in a TH/Condo that has only a crawlspace. The house is raised up about 3 feet from the ground and 1 mile from the ocean. Basically I live at sea level in an area where the elevations for miles are in the 3 - 10' range. My flood most likely will emanate from a Nor'easter (notably the storm of '62 - which wiped out much of the town where I live) or from the storm surge accompanying a hurricane.

To get flood insurance you need to have an elevation certificate - you may have gotten one with your survey and settlement papers. If not, you can get whoever did the property survey to perform the elevation survery and give you the elevation certificate. If a new one has to be made it runs $300-500. Flood zones and the local topographic conditions detrmine the BFE and flood insurance rates are based on the BFE - base flood elevation, the square footage of your basement/crawlspace/garage, and the square footage of any flood vents built into your dwelling. The BFE for your house may be different from house next door. Basically this locates lowest living area on your house compared to the expected flood height for the 100-yr flood.

Anyway, if your bank requires it (and it may not have had that requirement a few years ago) you will have to procure it. Even if they did not require it then, if you were to refinance now, they may add the requirement. Banks are just looking for reasons not to give you money these days. Just like insurance companies.

To make an informed decision on whether to buy it or not, you really need that BFE for your property. If you Google "flood insurance" you'll find links to Fema, the national flood insurance program, and lots of info on elevation certificates, etc. One thing you may want to do regardless if you buy the insurance is to raise up all of your systems several feet from the floor - esp compressor for your A/C or heat pump. The elevation certificate will tell you how high you shoud raise them. It does not take much water to fry a compressor.

Now the UGH part - In the last 6 months I have tried twice to refinance my house and was denied both times due to insurance issues, and both times for issues beyond my control. The first was denied because the condo assn had not yet renewed the master hazard insurance coverage for the coming year, so there was only 1 month remaining on the existing policy. Denied. The 2nd time the mtg co decided the flood insurance the condo assn had in place was insufficient. Denied.

Oh the insurance company would love to have sold me "gap" insurance at an exhorbitant rate, but would still need the elevation certificate ($$$) so the additional costs to do this, plus carry the extra insurance every year far exceeded the savings on the monthly payments in the time I plan to remain in this house.

Of course the current mortgage company is perfectly happy with the insurance coverage limits. And guess what... IT'S THE SAME MORTGAGE COMPANY! Go figure?

I hate mortgage and insurance companies this week .....

[indysteel]

Thanks, withm. Nothing I'd read to date--and admittedly I hadn't exhausted the subject--said anything about an elevation certificate. All I can figure out from FEMA's website is that I live in a "high risk" area. We bought in 2009 and refinanced last summer and neither lender made any mention of flood insurance. The previous owners did have a federally backed VA loan so, presumably, they would have potentially been required to carry it, yet no mention was made of it. I would mention that because we already have a 15 year fixed loan at a ridiculously low rate, I don't anticipate having to refinance again.

[Cataboo]

I'm not sure I understand your hesitation just because it's a federally run program. Are you going to not get medicare or social security because it's federally run? If you have no other options, medicare is better than nothing. Federally run flood insurance is again better than nothing.

You do have a short term loan with a low interest rate - but if you do lose that house to flooding, can you afford to rebuild it without flood insurance? I guess there's a chance to get money from FEMA if you don't have flood insurance.

A number of years ago, when I was in grad school, a tropical storm parked over the city I was living in for several hours - sending rain gushing through the city, and causing a ton of damage & flooding. Someone called me in the morning and said "are you okay?" I was living at 19th St & basically all the houses from 17th street on were condemned from the flooding. Most of the people did not have flood insurance because there was a flood wall on the river - but the flood wasn't from the river rising, it was from all the rain. I'd gotten knocked over and swept across the road from asphalt being swept down a hillside when I'd walked home from school.

So. Flood insurance seems like a good idea to me, especially if you know you live in a flood plain. although, I'm always absolutely boggled that people live in flood plains.

[OakLeaf]

I'm always absolutely boggled that people live in flood plains.

There are flood plains and there are flood plains. There are probably more people in the USA in the 100-year flood plain than not, I'd expect. And there's nowhere that isn't at very high risk of some natural disaster or another, whether it be earthquake, tornado, hurricane, lightning, mudslide, hail, blizzard ...

[PamNY]

Purely emotional, but I'd say get it. I know a couple of people who were wiped out by the flooding in Nashville, TN.

According to news reports I read, you need separate policies for house and contents (I don't know how accurate that is, but it was reported in multiple sources).

[indysteel]

A good portion of Central Indiana is in a flood plain, some areas worse than others. Granted, my current house may be at greater risk, but how much greater than my house in Indianapolis, I don't know. To suggest people are foolish for living in a flood plain ignores how much of the United States developed, i.e., along rivers and major waterways. You'd have to resettle a big chunk of people presumably to arid land--which presents its own problems. Plus, according to FEMA, one quarter of all claims are made by people in low to moderate risk. And these are just from people who carry the insurance.

My hestitation relates to sinking a serious chunk of change annually for something that may or may not happen. I am a Federal employee but have limited faith in some of what we do. I've heard and read too many stories about failed and delayed disaster relief so I think my question about whether it's a well run program is pretty valid.

Keep in mind that my house did not flood in the Flood of 2008, which most people agreed was THE 100-year Flood. So, while I will likely do it, I was trying to get my head around the risk versus cost. If we stay here 10 years, it's likely to be at least $16,000. That's not pocket change, nor obviously is losing our house and all of its contents either. So, yes, we're likely to get it. Thanks for everyone's input and information.

[PamNY]

My hesitation relates to sinking a serious chunk of change annually for something that may or may not happen. I am a Federal employee but have limited faith in some of what we do. I've heard and read too many stories about failed and delayed disaster relief so I think my question about whether it's a well run program is pretty valid.

Are you concerned about a claim being denied completely, or about delays/confusion as seems to happen (perhaps understandably at times) with FEMA?

I wonder if there's a way to find out something about how good the performance is.

[Biciclista]

if i lived where water could flow that high, i'd get flood insurance. So what if it takes a little longer than you like to get them to pay you? the alternative is to lose your house.

[Koronin]

Where we used to live (I did own the home) we were in a 500 year flood plain. The 100 year flood plain was on part of our property, but not where the structure was, so we choose to not carry flood insurance. If it was in the 100 yr flood plain my mortgage lender (Bank of America) actually would have required it. We are currently in the process of purchasing a home with a VA loan and they are not requiring flood insurance either. The home we are purchasing is not in a 100 year flood plain and is about 30 or so miles inland from the ocean. Now due to location (coastal county) the VA and the lender both require wind and hail insurance.

[bmccasland]

If your house and contents are damaged by rising water (a flood), then your homeowner's insurance will NOT pay. You do not need a federally backed loan (VA or FHA) to buy flood insurance. Whoever told you that didn't know what they're talking about. Flood is based on your risk area. Unless you happen to live on the high bank and know your home really is out of the 100 year flood plain, then you should get it. Also depending on your risk area, it may not be that much, or it can be as high as your homeowner's policy (which is what I paid living at -3.5 ft in the New Orleans area). Also 100-yr flood risk means that on average that bubbly creek will flood once every 100 years - but it could actually flood this year and the next year and the next year. Then not flood again for 200 years.

If you want to bear the complete recovery cost of a rising water / flood event, including loosing everything you own, then skip the insurance. Otherwise, buy flood insurance. It is a common misconception that homeowner's will cover flooding - it doesn't.

As to high-wind events, including those living in tornado alley - many homeowner's policies are requiring riders for high-wind or hail damage, an addition to your normal homeowner's policy. If you opt out of the rider, then have a high-wind event (tornado, hurricane), you may discover you're also out in the cold. Insurance companies exist to make money it seems.

[Koronin]

It's also the coastal areas for hurricanes, hence the reason we are required to have wind and hail coverage while we have a mortgage even though this area is extremely unlikely to be hit by a hurricane. Also being in a coastal county we cannot get a low deductable insurance plan like we had near Charlotte. Our deductible will be 3 times what it was there (lowest we can get here) plus an additional deductable for any named storm (done by percentage). Actually both our Realtor and insurance agent pulled checked to see if the property we're buying is in a flood zone, and it is not listed as being in one.
As bmccasland stated flood damage is not covered by regular home owner's insurance policies. Now if you live in a coastal county and buy a home on the beach, good luck find a private insurance company to issue wind and hail as well as flood, esp if it's a rental property. If it's a primary residence you might be able to get it depending on which insurance company you're dealing with.