Bodin Realty. Flood Insurance Discussion

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1 Bodin Realty Flood Insurance Discussion Thank You Bodin and Kristin White About Pamela McCann Fema Flood Program Optional Program Comparative analysis Quote compare Facts about Flood Insurance 1

2 ABOUT ME Pamela McCann is a seasoned Risk Advisor and has been working with C-level career professionals, business owners and individuals for the past several years. She leverages her insurance knowledge with her exceptional networking abilities to provide the best possible solutions to mitigate exposure and satisfy client concerns. Pamela is not only resourceful; she takes a hands-on approach to client requirements in a very personal way. She adheres to delivering the most cost effective coverage without comprising financial risk. Throughout her 30-year career, McCann has held a variety of corporate financial roles, ranging from chief financial, information officer and controller. In those roles, she was responsible for negotiating business insurance and employee benefits. Pamela spends her free time creating glass art and jewellery. Thank you for the time and we look forward to answering all of your questions in the days ahead. Let us know how we can help you manage the risks in life. It s what we do. Pamela McCann 2

3 Why choose Alliance? 1. Multiple Carrier Options Partners for Competitive Pricing and Flexibility 3

4 WHAT IS FLOOD INSURANCE? Supplementary to a homeowner's policy, flood insurance is extra coverage purchased through the National Flood Insurance Program expressly for protection of your property and belongings should your home be damaged by flooding. Obviously, premiums for this insurance are higher in areas deemed highrisk for flooding, while low-risk areas carry lower premiums. As with all insurance policies, flood insurance is a safety net designed to protect homeowners from unexpected damage to their homes. Homeowners without such insurance who find themselves in the midst of even an unlikely or unexpected flood could face paying for damages out of pocket. Talk to your real estate agent and to your insurance company when you make a move to a new home. These professionals will be able to guide you in making a decision about whether obtaining flood insurance is the right decision for you. HOW DO I KNOW IF I AM IN A FLOOD-PRONE AREA? Flood insurance rates are determined by rate maps created by the Federal Emergency Management Agency (FEMA) and are designed to reflect the level of flood risk in a given area. These maps are available online through the NFIP and can give you an idea of the risk of flooding in your area. Maps are continually updated as changes occur within a community. Your insurance agency should have a current picture of the flood risk in your area. IF MY RISK SEEMS LOW, WHY MIGHT I NEED FLOOD INSURANCE? According to FEMA, while some areas are at lower risk for flooding, any area of any community is susceptible at some level; just because your community hasn't flooded before doesn't mean that it won't. Poor drainage, snow melt, unexpectedly heavy or ongoing rains, or changing topography due to natural or human causes can change your flood risk at any time. It's important to remember that if you are not covered by flood insurance, it will be much more difficult to recoup any losses due to flooding and water damage. Lower-cost policies called Preferred Risk Policies may be available for homeowners living in low-risk areas. FEMA FLOOD PROGRAM Created in 1968 to give property owners the ability to insure against flood loss, the NFIP has provided much-needed coverage for flood damage reparations for an estimated 5.6 million homes nationwide. With participation agreed upon between local communities and the federal government, the program would then establish and manage flood plain ordinances to reduce future flood risks in exchange for federally funded insurance protection that property owners could purchase. Maps were created to identify flood zones and special flood zone hazard areas (SFHAs), and the Federal Emergency Management Agency (FEMA) was put in charge of overseeing the program. 4

5 The program was set up to be self-sustaining, though during times of higher-than-average claims losses, the NFIP borrows from the U.S. Treasury. For the most part, it worked well, with any monies borrowed paid back to the Treasury with interest. Then came Katrina. And then Rita. The losses from the 2005 storms flooded the program, causing NFIP to turn to the Treasury Department for a loan. Some $18 billion later, the NFIP has been operating in the red and struggling to find ways to repay the loan and handle the regular flow of claims. However, $18 billion of debt is a lot to correct. According to a Congressional Budget Office (CBO) report, the changes implemented would reduce NFIP s need to borrow by $380 million between 2012 and 2014 and result in a net income increase of $4.7 billion by But the report states that current premiums are not enough to cover expected costs, and that could result in the NFIP borrowing up to the statutory limit by 2015, which would result in no effect on direct spending for the next 10 years. The National Flood Insurance Reform Act of 1994 established the community rating system, which attempted to encourage communities to surpass minimum requirements for development within flood plains. Then in 2004, the NFIP was again amended in an effort to reduce property losses on properties that have sustained repeated flood losses. Enter Biggert-Waters On July 6, 2012, President Obama signed the Biggert-Waters Flood Insurance Reform Act of 2012 extending the National Flood Insurance Program through September 30, Known as the Biggert-Waters Flood Insurance Reform Act of 2012, the act is more than the usual extension. It s a much-needed overhaul of the program, which experts think can right its financial wrongs thanks to fiscal reforms that have been built into the new legislation. Enter a whole new set of rules. For starters, the legislation extends the NFIP for five years. In the past, Congress has managed to keep the program limping along with extensions of smaller increments. Another change: flood insurance requirements for lenders. Thanks to the Coastal Barrier Act, some communities were carved out as areas that are not part of nor are they able to obtain national flood insurance. They were forced into the private market, Treutel says. However, many lenders weren t able to use that as a viable alternative under NFIP rules. Under Title 2, that s changed. Title Two requires lenders to accept non-nfip-backed coverage provided by a private insurer provided that coverage meets all NFIP requirements, says Treutel. Wind v. Water One of the most intriguing changes taking place under the new legislation is the inclusion of an amendment that will help determine water and wind damage claims much faster and with more accuracy. Introduced by Senator Roger Wicker (R-Miss.), the Consumer Option for an Alternative System to Allocate Losses (COASTAL) Act is now an amendment to the NFIP and will help determine whether a claim is the result of water or wind damage. Write Your Own Catcoverage 5

6 FAQ s about Flooding In the past 5 years, all 50 states have experienced floods or flash floods. Everyone lives in a flood zone. People outside of high-risk areas file nearly 25% of NFIP claims and receive one-third of disaster assistance for flooding. Most homeowners insurance does not cover flood damage. If you live in a Special Flood Hazard Area (SFHA) or highrisk area and have a Federally backed mortgage, your mortgage lender requires you to have flood insurance. Just a few inches of water from a flood can cause tens of thousands of dollars in damage. Flash floods often bring walls of water 10 to 20 feet high. A car can easily be carried away by just two feet of floodwater. Winter storms and snowmelt are common (but often overlooked) causes of flooding. New land development can increase flood risk, especially if the construction changes natural runoff paths. 6

7 Federal disaster assistance is usually a loan that must be paid back with interest. For a $50,000 loan at 4% interest, your monthly payment would be around $240 a month ($2,880 a year) for 30 years. Compare that to a $100,000 flood insurance premium, which is about $400 a year ($33 a month). *$129 residential annual premium provides $20,000 building and $8,000 contents coverage. $643 commercial annual premium provides $50,000 building and $50,000 contents coverage. You are eligible to purchase flood insurance as long as your community participates in the National Flood Insurance Program. Check the Community Status Book to see if your community is already an NFIP partner. In most cases, it takes 30 days after purchase for a policy to take effect, so it's important to buy insurance before the storm approaches and the floodwaters start to rise. In a high-risk area, your home is more likely to be damaged by flood than by fire. From 2003 to 2012, total flood insurance claims averaged nearly $4 billion per year. When your community participates in the Community Rating System (CRS), you can qualify for an insurance premium discount of up to 45% if you live in a high-risk area and up to 10% in moderate- to low-risk areas. 7