As published in the Savannah Morning News - 4 April 2013
Flood Insurance – do you really need it?
This article was not what I had intended to write, but recent events have prompted me to change it up. I was going to introduce seniors to active lifestyle communities within the 4 corners of our county, and invite them to some fun community events. However, I have been asked not to write about particular places, lest I leave some out. So instead, I will list senior focused events on my website for those who have interest.
Today, I’ll discuss a concern that affects the housing market, for buyers and sellers. I actually wrote my State Representative about this issue, asking for action. This article may cause a flurry of comments from insurance companies, and updates will be forthcoming.
Recently, I was involved in a sales transaction on Skidaway Island, and the sellers represented that flood insurance was required, but did not provide the FEMA National Flood Insurance Program Elevation Certificate (commonly called a flood certificate) for the property. This is a necessary document that buyers need in order to obtain flood insurance, and is required for loan approval prior to closing. I spent hours trying to get the sellers' insurance company to release the flood certificate so my buyer would not have to pay $300 for an elevation survey needed to obtain a new flood certificate.
The Chatham County records are often outdated. If the sellers do not possess and provide this document, buyers are forced to pay for a new flood elevation survey for the property they wish to purchase.
In this case, the sellers provided a copy of the Flood Declaration Page reflecting their $700 annual premium. I called the 800 number and spoke to the insurance company representative that issued the flood policy. I was told they did have the certificate, but the local office had to release it. The local office did not have a copy on file, but days later, after several phone calls and emails, I finally received it. This should have been a simple procedure, and I was stymied as to why it was so difficult to get this document…but that's not the end of the story.
After obtaining the flood certificate, the buyer's insurance agent informed me that the property was no longer in the 100 year flood plain. Without the provided flood certificate, my buyer would have been forced to spend $300 for a new elevation certificate just to find that out. More surprisingly, within days, the seller told me they received a bill to renew their flood insurance, when in fact, it was no longer required!
The lack of cooperation to expeditiously provide the flood certificate, along with the billing of their client for an unnecessary policy, raised red flags for me.
Realtors and the public rely on insurance companies to find out what policies are needed to protect their property, and if the companies are not required to update their files to reflect the updated FEMA flood map before billing their clients, people are unnecessarily paying for insurance (at exorbitant rates) that they don't need.
The BIG picture: Requiring flood insurance on a property is a factor that affects the housing market. When I am showing homes, some buyers stipulate that they will not buy a house that requires flood insurance because they don’t want the added expense. I am instructed to eliminate homes that require it. The cost of flood insurance locks out buyers who are unable to pay or qualify for a higher monthly payment. This hurts sellers that do not need flood insurance, but mistakenly think they do, and are paying high premiums for it.
Because I live on an island, I choose to have flood insurance even though it is not required, making my policy very inexpensive. This brings me to my next question: What happens to all the money that is collected by insurance companies for high risk policies on properties that don't require flood insurance? Is this insurance fraud or a flawed, mismanaged system which needs to be fixed?
Unlike hazard/liability property insurance, the cost for flood insurance is not negotiable and is set by FEMA. If you don’t need it, it’s cheap. If you do, it’s expensive. It could affect a buyer’s desire or ability to purchase your home. So, Sellers, call your insurance company to see if your property is still in a flood zone. There is a chance you no longer need it.
Next week in Moving Mom…Flood, Part II? Stay tuned!