Friday, September 23, 2016
What you and your agent don't know can hurt you
Our office always spends a lot of time educating ourselves about flood insurance because we deal with it on a daily basis. In fact, when this call that I am about to describe came in, I was in the process of actually reading the FEMA Standard Dwelling form, which I haven’t done in a year or so, just to keep it fresh.
I just had a phone call from a potential client. He lives in the next town over and is distressed because his flood insurance renewal went up by $1,000, to $4500. He contacted his long time agent, who represents one of the big direct writing companies. His agent has been a great help for many years on many things, but when asked about this, just shrugged his shoulders and said ‘it’s FEMA, it’s the same for everybody, and I wouldn’t know how to help’.
This agent is, I’m sure, a nice guy and very good with traditional auto and home products. But he is like many others in that they have been trained that flood insurance is just FEMA and there are ‘no differences’. In some ways, I can be selfish and say I like the idea because it means our office will look that much better, but I’m not that kind of person, and what it means to me is that people are paying more than they should be.
Unfortunately for clients, this scenario plays out daily all across the country. Not only is all flood insurance NOT the same with a new crop of private flood insurance policies available now and new ones coming out all the time, but knowledge of FEMA’s rules often allows us to find errors and choices that can reduce the rates.
From the price this person told me they were paying, I can almost guarantee that they are carrying a very low deductible, and quite possibly also getting the $250 non-primary residence surcharge if they or their agent did not follow up on the requests sent by FEMA in the past 2 years.
I was able to give him three suggestions, one or more of which I am quite confident will save them money, and if not, they will know they have a correct policy which is still better than ‘I Don’t Know’.
The person told me that they only got a couple of inches of water in their basement in the Sandy storm. So that is an indication that the house may be high enough to qualify as ‘elevated’ by FEMA’s definitions. So I referred them to an engineering firm (Gayron-deBruin) that has a unique way of handling elevation certificates. They charge a $75 fee to look at public records and maps and see if the house is likely to qualify. Then if that checks out, and you want to go on to the next step, it’s $225 to have them come and look and then IF at that time it is determined that you will benefit from an elevation certificate or LOMA (Letter of Map Amendment) they charge an additional $300. That brings their charges to the same as most firms, but ONLY if you proceed through all the steps. If they determine that the certificate will not help, the charges stop. So instead of being at risk for the whole $650 or so right from the start, many people are able to stop after the initial $75 or $225.
After it is determined whether an elevation certificate would help, our next step will be to review their current policy and suggest possible changes or corrections to lower the rate.
The final step will be to check with the various private flood insurance carriers to see if they offer a lower rate. However with the rules currently in effect, we also have to be VERY careful about moving anybody OUT of FEMA because until congress passes an expected new regulation, if a client leaves FEMA for more than 60 days, they will lose ALL their pre-Firm subsidies and have to pay the actuarial rates. This is yet another way that agents who do not keep up with all the changes might damage their client rather than helping.