Flood Insurance

[mjarrels]

I heard today that only 9% of the midwest homes had insurance... I am shocked that folks who don't carry insurance! Did we not learn something from Katrina?

mark

 

[bigshovel]

That is not surprising to me. If it were on the coast and the ocean was in view I could picture them being able to afford insurance. Being in middle class America it was probaly out of reach for most. A few friends and I own a getaway hunting camp near a major river that floods frequently, flood insurance for that structure only is 4300 bucks a year. Pretty steep seeing that we can rebuild the square footage every five years almost for that kind of money. We gamble, on year 11 and no problems yet. My heart goes out to all of those suffering in the mid west and I can't imagine devastation at that level.

Brad

 

[mjarrels]

I have a uncle who has a fishing shack on the north river... washed away many times... now his shack has a cable attached and the old ford tractor pulles it up the hill when flood waters are high... $1500.00 building, not a HOUSE.

mark

 

[bigshovel]

Understood not a house. But, 900 square ft finished we can rebuild on the masonary foundation for 40k. Those homes in the midwest should have been insured but in a lot of cases out of reach due to cost. Alot of insurance companies won't insure new construction in flood plains.

Brad

 

[Bird]

It's always seemed to me that your homeowners insurance should include flood insurance. Yes, that would mean our premiums would be higher, but if everyone who has homeowners insurance were paying, the premiums would undoubtedly be less than some of us are now paying for both homeowners and flood insurance. We're not in a "flood plain", but I learned that this area used to flood years ago before the current drainage ditches and channels were built. I don't expect it to flood again, and in fact, I think if my house ever floods, the water will be even deeper in our local police station. However, I decided to buy the flood insurance; just renewed it last month. I only have $125k flood insurance and it cost $277 for the year.

 

[mjarrels]

I remember when I lived on Whidbey Island WA... use to drive to Seattle sometimes... local river flooded (trash in the trees 10' high)... Yep, putting a moble home on the banks. DUMB people!

mark

 

[dooleysm]

I have a buddy in Columbus, IN that got flooded a few weeks back. He did not have flood insurance, nor did any of his neighbors. The closest body of water is a tiny creek about a half mile away. I don't know if he's in a flood plain or not, but when we drove up there to help him cleanup a few days after the flood I never would have thought he could get flooded. Flooding is just not something that would even cross your mind if you lived where he lives.

On a related note, I checked on earthquake insurance for my house several months ago on a whim. Our current insurance is about $600/year. To add earthquake coverage was about $350/year. Yikes, over a 50% increase! Then about a month after that there was a 5.3 magnitude earthquake centered about 100 miles away that shook us up pretty good. After that earthquake and seeing my buddy deal with the aftermath of a flood with no insurance, I'm re-thinking that earthquake coverage.

 

[MossRoad]

I heard today that only 9% of the midwest homes had insurance... I am shocked that folks who don't carry insurance! Did we not learn something from Katrina?

mark

Did you see those houses along the Wisconsin Dells that got washed away? No flood insurance. They tried to get flood insurance, but FEMA and the local village could not come to an agreement, so flood insurance was not available to them, according to one of the homeowners that had his house and most of his land swept away. They took a gamble by living next to a man-made lake and having no flood insurance and lost. Now they have a huge mortgage payment that is still due. Most likely they will declare bankruptcy and write it off, which will increase the costs for the rest of us.

 

[tallyho8]

Flood insurance is cheaper than fire insurance in almost all areas. There are some who build on the banks of a river that typically overflows every few years, and know that their home will eventually flood, and then complain about the high cost of their flood insurance. Naturally, if you build where it normally floods the insurance company will charge more for flood insurance.

The situation that most people are in though is that they are not located in an area with frequent flooding so their mortgage company does not require them to have MANDATORY flood insurance, so they presume they are safe from flooding and do not get insurance.

When New Orleans flooded after Katrina, people around the country were shocked to hear that most New Orleanians did not have flood insurance, but much of this area had never flooded in the 300 year history of this city and the citizens did not expect it. The same thing is now occurring in the Midwest.

When homes were blown apart by Katrina winds and then the area flooded afterwards, people's homeowners insurance didn't pay off because they claimed the homes were destroyed by flood instead of wind. In areas where an earthquake hits and causes a home to burn down, the insurance company doesn't pay off if the people don't have earthquake insurance because they claim the fire was caused by an earthquake. The only way to stop these insurance squabbles is to make homeowners insurance cover ALL disasters and not make you get different insurances for different losses to your homes so that they can debate which disaster caused your loss. If every home had all peril homeowners insurance it would spread the risk and most peoples insurance cost would not be raised significantly.

 

[LMTC]

If every home had all peril homeowners insurance it would spread the risk and most peoples insurance cost would not be raised significantly.

Depends on what you call "significantly". I don't like the idea of socialized anything, and that would amount to socialized insurance. Pay for the peril depending on the risk. Now if flood insurance isn't available where you live and you suffer a flood, that's a different issue, and has more to do with government interference than anything else.

Insurance companies need to be free to offer flood insurance to anyone. I would probably buy it, because the cost would be negligible where we sit, and the potential loss if it actually happened would be staggering. I bought earthquake insurance when we built, just because we are along the lines affected by the New Madrid fault (though 400 miles away), and it is not expensive for me.....but the consequences if impacted by an earthquake could be devastating.

We likely will all bear some of the costs indirectly no matter how this plays out, but bearing them directly (in terms of governmental remittance to those affected) just doesn't sit right with me. Until I am given some control over other people's choices about assuming risks, I remain opposed to paying for the consequences.

 

[tallyho8]

Depends on what you call "significantly". I don't like the idea of socialized anything, and that would amount to socialized insurance. Pay for the peril depending on the risk. Now if flood insurance isn't available where you live and you suffer a flood, that's a different issue, and has more to do with government interference than anything else.

You are incorrect about it being socialized insurance. Insurance companies charge more for the same policies in different communities depending on the risk. A community with a fully staffed fire department covering each square mile has lower fire insurance rates than a 20 square mile community with a volunteer fire department. If all peril insurance was mandatory on all homeowners policies, then communities at high risk of earthquakes would still pay more for the insurance than those in a low risk area and those with high risk of flood would still pay more than those living in areas of a low risk flooding.

If everyone paid the same price for insurance regardless of risk, this would be socialized insurance. But people at high risk would still pay more for insurance just like people who have records of accidents or DWI pay more for auto insurance.

If your home was covered with all peril insurance and something happened to it then the insurance company would have to pay off regardless of what caused the loss. At the present time much money is spent on attorneys by both the homeowner and the insurance company when a loss is questioned and suits are filed.

If all homeowner policies were all peril policies the rates would not be much higher because the insurance companys would operate on a broader base and we would not have our tax dollars being spent to compensate the many people who suffer losses from floods, earthquakes, etc. that their homeowners policies do not cover.

 

[Wombat125]

If all peril insurance was madatory on homeowners' policies as a federal mandate, then I think it would absolutely be socialized insurance.

Just because there may be geographical rate adjustments doesn't mean the feds wouldn't still be forcing you to buy a Coke with your cheeseburger.

Now if the private insurance companies did it on their own as a way to increase revenue and made it a competitive advantage, that's good capitalism. I just don't see that happening though.

 

[LMTC]

Tallyho, I see your point and acknowledge it; I was not considering that the all-peril rate could still be adjusted for any area depending on the various risks in that area. Point conceded, thanks for the clarification.

My concern is there would then still be subisidies, etc. because someone wanted to live somewhere beyond their means to insure, but that is not a response to your post...it's more a response to how our society has come to function in the last 50 years.

 

[tallyho8]

If all peril insurance was madatory on homeowners' policies as a federal mandate, then I think it would absolutely be socialized insurance. QUOTE]

Homeowners Insurance started out as fire insurance on your home and they added wind and hail insurance also to protect your home. Was the wind and hail insurance socialized insurance?

They added contents insurance to the policy. Was this socialized insurance?

Then they added liability insurance to protect your home from lawsuits. Was liability coverage socialized insurance?

They added medical coverage for visitors to your property. Was medical coverage socialized insurance?

Most homeowners policies have added many other coverages to the homeowners policy also such as theft and vandalism. Are these socialized insurance?

Why then would it be socialized insurance to add all perils to a homeowners policy?

Remember, if you have no mortgage on your home which requires certain types of insurance, you may pick only the coverages that you wish on your home and you do not need a homeowners policy or any policy at all.

I am merely stating that the reason people get a homeowners policy instead of just fire insurance is because they want to protect their home from any loss that may occur yet a typical homeowners policy has so many "ifs ands and buts" written into it, that if you loose your home to a peril, the company can say "sorry, you forgot to read the fine print. That loss is not covered". All perils would prevent this uncovered loss.

No one is asking to make insurance coverage mandatory on your home that you own free and clear of encumbrances though this would be highly recommended and would keep the taxpayers from having to pay for your home when a catastrophe occurs.

 

[tallyho8]

My concern is there would then still be subisidies, etc. because someone wanted to live somewhere beyond their means to insure, but that is not a response to your post...it's more a response to how our society has come to function in the last 50 years.

I agree with you completely on that statement. After Katrina I was amazed at the number of homeowners who had no insurance whatsoever and demanded relief from the taxpayers. I still know people who had their damages reimbursed by the government and have new homes with no insurance. I had one person tell me "Why should I waste my money on insurance like you are doing? If another hurricane washes my house away the government will buy me a new one."

 

[Champy]

Some folks here in Columbus who got flooded out were not even in Flood Plains and were not required or expected to have insurance. Now they're really being shafted by their insurance companies......

Also the latest in government "help" - folks who lived in 100yr flood plains; had insurance (or not); and experienced flood damage costing more than 40% of their home valuation; are now being told by local inspectors that in order to repair or rebuild their homes, they'll have to fill in the basements and raise the foundations 3'........or no building permits will be issued! These are whole neighborhoods of people in the middle of town who live 1/4 mile from a 20' wide creek... not someone who built out on the banks of a major river.

 

[LMTC]

Some folks here in Columbus who got flooded out were not even in Flood Plains and were not required or expected to have insurance. Now they're really being shafted by their insurance companies......

Also the latest in government "help" - folks who lived in 100yr flood plains; had insurance (or not); and experienced flood damage costing more than 40% of their home valuation; are now being told by local inspectors that in order to repair or rebuild their homes, they'll have to fill in the basements and raise the foundations 3'........or no building permits will be issued! These are whole neighborhoods of people in the middle of town who live 1/4 mile from a 20' wide creek... not someone who built out on the banks of a major river.

If flood insurance was available to them and they passed, then they should suffer the loss. If it was not available, different story. Our house is 200' in linear distance and 25' up in elevation from a creek that normally runs about 4' wide and a foot or less deep. I have seen it run 50' wide and 12' or so deep. It comes up very fast, goes down almost as quickly. I tried to purchase flood insurance, because I figure I am responsible for myself....it is not available in my location. Don't know why, we're nowhere near even a 500 year flood plain, but it's not.

 

[tallyho8]

Some folks here in Columbus who got flooded out were not even in Flood Plains and were not required or expected to have insurance. Now they're really being shafted by their insurance companies......

Also the latest in government "help" - folks who lived in 100yr flood plains; had insurance (or not); and experienced flood damage costing more than 40% of their home valuation; are now being told by local inspectors that in order to repair or rebuild their homes, they'll have to fill in the basements and raise the foundations 3'........or no building permits will be issued! These are whole neighborhoods of people in the middle of town who live 1/4 mile from a 20' wide creek... not someone who built out on the banks of a major river.

These are the same building requirements facing the citizens of New Orleans after Katrina and it just goes to show you that it can flood practically anywhere and how important it is for everyone to have flood insurance even if your mortgage company does not mandate it.

 

[Wombat125]

Homeowners Insurance started out as fire insurance on your home and they added wind and hail insurance also to protect your home. Was the wind and hail insurance socialized insurance?

They added contents insurance to the policy. Was this socialized insurance?

Then they added liability insurance to protect your home from lawsuits. Was liability coverage socialized insurance?

They added medical coverage for visitors to your property. Was medical coverage socialized insurance?

Most homeowners policies have added many other coverages to the homeowners policy also such as theft and vandalism. Are these socialized insurance?

I completely agree with you that none of these are socialized insurance. I'm not an insuranceologist, but it sounds like all of the examples sited above were initiated by either the homeowner or insurance company policy.

I'm not even saying that all-peril insurance is a bad idea.

I guess I got hung up when I read the word mandatory. Perhaps, in retrospect, I read too much into the original discussion, but my mind immediately went to government legislation to enforce said mandate. Lately I have kind of a short fuse when it comes to our legislators constantly trying to protect us from ourselves.

Why then would it be socialized insurance to add all perils to a homeowners policy?

Provided this is initiated by consumer demand and private insurance company policy, I'm completely on board.

Remember, if you have no mortgage on your home which requires certain types of insurance, you may pick only the coverages that you wish on your home and you do not need a homeowners policy or any policy at all.

I am merely stating that the reason people get a homeowners policy instead of just fire insurance is because they want to protect their home from any loss that may occur yet a typical homeowners policy has so many "ifs ands and buts" written into it, that if you loose your home to a peril, the company can say "sorry, you forgot to read the fine print. That loss is not covered". All perils would prevent this uncovered loss.

I would very much like to see an all-perils option for home insurance coverage. I will be the first to admit that I haven't read through the volumes of fine print in my own policy.

No one is asking to make insurance coverage mandatory on your home that you own free and clear of encumbrances though this would be highly recommended and would keep the taxpayers from having to pay for your home when a catastrophe occurs.

I agree here too. I always wear a helmet when on a motorcycle because in addition protecting my own melon, I potentially reduce the emotional and financial burden of those around me when I crash. But I would never consider voting for a mandatory helmet law.

The crux of my position still comes down to exactly who is doing the mandating for the all-perils insurance.

 

[Bird]

If flood insurance was available to them and they passed, then they should suffer the loss. If it was not available, different story. Our house is 200' in linear distance and 25' up in elevation from a creek that normally runs about 4' wide and a foot or less deep. I have seen it run 50' wide and 12' or so deep. It comes up very fast, goes down almost as quickly. I tried to purchase flood insurance, because I figure I am responsible for myself....it is not available in my location. Don't know why, we're nowhere near even a 500 year flood plain, but it's not.

If you go to Floodsmart.gov: Your premier resource for flood insurance information, you'll probably find the explanation. Flood insurance is only available if your "community"; i.e. city, county, etc. wishes to participate, so you have to contact your local elected officials if you want your community to participate. That website should explain what has to be done to join the National Flood Insurance Program (NFIP).