Tuesday, October 01, 2013

Making Sense of Flood Insurance in the Current Long Island Housing Market

Welcome back after a long year post Sandy. Our office has been very busy handing wind and flood claims under FEMA flood policies, Lloyd's of London specialty flood coverage and excess flood policies, and our various homeowner customers. And since we cover a big area, we have been working on losses in New York and New Jersey as well.  We in the office are proud of the work we have done.

Now comes another matter. What is going to happen to coastal and waterfront property values, with everything that has happened? Homes have been destroyed, neighborhoods decimated, and there are still a lot of people who have yet to even get back in! Now the questions come. Should we raise our house? What is flood insurance going to cost going forward? And how about homeowner's insurance, which is where wind damage is covered?

The large insurers continue to cancel and non-renew properties they consider too close to the water. But the water is not what they are afraid of. It's those lovely bay and sea breezes everyone talks about as one of the reasons they live by the water. Go a little ways inland, and the buildings and houses start slowing up the winds fairly quickly. In fact, hurricanes generally can't survive long over land because they need to suck up their water supply from the ocean and their wind power from the strong currents over open waters.

As far as flood insurance, the answer is pretty complicated. And a lot of it is on a house-by-house basis. So you can no longer call us up with an address and get a fast flood insurance quote that is firm. A flood insurance elevation certification will be required with most sales in order to find out what flood insurance will really cost going forward.

The problem is that these certifications, which must be done by a licensed engineer or surveyor, can cost from $400-1000. If you are a buyer, and you want to look at a variety of homes in this market where plenty are available to look at, you would have to ask for a copy of the certificate from the seller, or pay to have one done yourself.

To me it would make much more sense if I were selling, to have a flood insurance elevation certificate done and offer a copy to any prospective buyer. I think right now that would give you a good leg up in making for a smoother sale. Once a prospective buyer has that certification in their hands, they can ask their insurance agent of choice to get them a firm quote or advise if anything needs to be done to get the best rate.

Flood insurance has gotten a lot more complicated. Make sure you get the right information or it could be very costly in the future, and i mean 3-4 years, not decades. There are homes which, if not raised, will find themselves paying almost $10,000 in the next few years for flood insurance. But DON'T PANIC, those are relatively few, and will have had multiple flood losses already, and so the point FEMA is making is, raise it or don't expect us to keep paying you over and over for it.