Thursday, October 8, 2020 / by Anne Rose
Two years later, with the 2020 hurricane season almost behind us, Kirk Pugh, KBT Realty Group co-owner, reflects on the lessons learned from the Hurricane Florence disaster.
Why is flood insurance coverage so misunderstood in the scheme of homeowners insurance options?
Kirk: I think many view insurance as a necessary evil and yet another box to check on the to-do list. In our coastal area, many homebuyers are uneducated on the distinctions between Basic Hazard, Wind and Hail, and Flood insurance.
Further, they do not understand common exclusions or necessary endorsements needed to make sure they are truly protected. After a storm event, many are surprised to learn that things like fences and sheds are excluded from coverage for lack of an additional structures rider.
Many are equally surprised (disappointed) to learn that wind-driven rain is a common exclusion.
How does the flood insurance offered by private carriers work? What is the national flood insurance program?
Kirk: In Coastal North Carolina, most major carriers will not write flood insurance policies and route all flood policies thru the NFIP.
Florence taught us that even homes outside of the FEMA Flood Zones can and do flood.
A typical policy for homes outside a FEMA flood zone can run between $500 and $700 per year. Coverage through the NFIP limits coverage to $250,000 with an additional limit for contents. That’s a pretty hefty ROI in the event of a natural disaster.
In COBRA (or Velocity) Zones, NFIP will not offer coverage. In these areas, or in the case of luxury homes (where $250,000 in coverage is not sufficient), private carriers like Lloyd’s of London will offer private flood insurance or excess flood insurance to cover a lack of insurability or the gap between NFIP coverage and actual loss.
Does KBT Realty Group advise that even those homebuyers who don't live in FEMA flood zones consider getting flood insurance?
Kirk: Everyone should have flood insurance.
Rising water is commonly excluded from coverage even in non-flood zones and non-coastal areas. Three to six inches of water in your home can cost many thousands of dollars in damage and remediation expense.
Flood insurance is not only for hurricane season. A simple summer thunderstorm and subsequent flash flood can be devastating in the absence of rising water coverage.
When recommended flood insurance and coverage levels, what does KBT suggest for homeowners in a designated flood zone versus a homeowner not located in a flood zone?
Kirk: In most cases the NFIP Coverage Limits ($250,000/$100,000) will cover the cost of damage for both categories. Luxury homeowners may want to consider excess flood coverage thru private carriers.
When shopping for flood insurance, what should homeowners and new homebuyers consider and what should they avoid?
Kirk: NFIP Flood coverage premiums will be directly related to base flood height elevation of the bottom of the first finished floor. Homeowners in FEMA Flood Zones will be required to have an elevation certificate from a surveyor in order to receive a hard quote from NFIP. In some cases, premiums can be lessened with higher deductibles.
What does flood insurance cost for a home in a designated flood zone compared those that are not in a flood zone?
Kirk: Again, premiums are based on risk. New construction on pilings where the height of the bottom of the first finished floor is at 16’ above mean high water can be relatively low, while premiums for a lesser pre-firm home built on grade can be exorbitantly expensive.
So, the cost can vary widely based on elevation and style/size/cost of the home itself.
Is purchasing flood insurance a good investment, even if your home is not located in a flood zone or area prone to flooding, especially considering that extreme weather events seem to increase every year?
Kirk: I had personal experience with more than three dozen homeowners after Florence, and none of them were located in a FEMA flood zone. Each and every homeowner had between 6” and 6’ of water in their homes. Only eight had flood insurance.
The average premium in the neighborhood was $570/yr. Many of the homeowners without flood insurance ended-up in short sale or foreclosure situations. Those that had coverage were able to sell or renovate with no financial loss.
In light of your experience in a coastal region with risks of flooding and extreme weather events, what are KBT Realty Group's tips and recommendations regarding flood insurance?
Kirk: We don't only encourage our buyers to purchase flood insurance. Wind and Hail Insurance is equally important, and sometimes more expensive, than flood insurance.
In Coastal areas sometimes flying debris can be as damaging as rising water. It is also very important to make sure that wind-driven rain is covered.
Flood insurance covers rising water. A wind-driven rain endorsement covers falling water when the tree limb goes through your roof.