Flood insurance deductible (1 Viewer)

[vdubee]

Currently, we live in an AE flood zone. I’m looking to save a little money if it makes sense. Right now, I have a $1250 deductible on a $250,000 policy which is $2200/year. Do I really need that low of a deductible? We would likely save over $1K year if we raise it to $10K. Just wanted to see what some people who have dealt with this thinks. Thanks for any input!

 

[superchuck500]

Currently, we live in an AE flood zone. I’m looking to save a little money if it makes sense. Right now, I have a $1250 deductible on a $250,000 policy which is $2200/year. Do I really need that low of a deductible? We would likely save over $1K year if we raise it to $10K. Just wanted to see what some people who have dealt with this thinks. Thanks for any input!

I think it’s a question of risk tolerance and claim frequency. If you raise your deductible to $10K ($8750 more than your current) to save $1K annually, you’re basically borrowing from yourself on a future claim. If it never comes, you’re golden. If it comes after nine years, you’re still to the good. If it comes before nine years, you’ve come out behind.

Plus having a low deductible means that minor claims might be covered that wouldn’t be on the $10K deductible.

I don’t think there’s a right answer because nobody has a crystal ball. But have you ever made a flood claim at that property? What is the average time between claims for your zip code?

@efil4stnias probably has some wisdom here.

 

[dtc]

How high is your house above the required flood level and how often has the area flooded?

 

[jrdbrn]

Currently, we live in an AE flood zone. I’m looking to save a little money if it makes sense. Right now, I have a $1250 deductible on a $250,000 policy which is $2200/year. Do I really need that low of a deductible? We would likely save over $1K year if we raise it to $10K. Just wanted to see what some people who have dealt with this thinks. Thanks for any input!

Ouch. I am in Bourg and my flood in a AE is $705 a year for $250k and $5k deductable. I am on a 4' mound though.

 

[dtc]

Everybody needs to realize that even if your policy says it's for 250k, it only covers that amount if your house is worth that much. If your house is worth 200k according to them, it's only ever going to receive 200k.

Make sure you're not over-insured.

 

[SaintsFan742]

Do you have a current elevation certificate for your home? If not, it might behoove you to get one.

 

[efil4stnias]

Everybody needs to realize that even if your policy says it's for 250k, it only covers that amount if your house is worth that much. If your house is worth 200k according to them, it's only ever going to receive 200k.

Make sure you're not over-insured.

There is a fine line though....NFIP policy carries an 80% co-insurance clause.

So you MUST insure to within 80% of the value in order to not be penalized in the event of a loss. So homeowners need to make sure they arent under-insured as well. ( outside 80% of the value of the home )

As to the OP, i think it has been touched on. Risk tolerance. What you will also find is the move from $1250 to say $5000 is not dollar for dollar. You might save $300 but just increased your deductible by $3750. Talk it over with your agent.

 

[vdubee]

Thanks for all of the input. I guess a little more detail is needed. I actually lived in the house from the early 80's to the early 90's. My parents then sold the house. Last year, I purchased the house back from the people who bought it from my parents. I know for a fact that the house has never flooded. There was an instance back in the 80's where we had water at the front of our subdivision but at least 50-100 yards away from the home. We tried to transfer the previous flood policy ($450/year) but FEMA required a new elevation certificate. IIRC, we are 2 feet below sea level. However, I really feel that it is unlikely we would flood but there is always a chance.

 

[insidejob]

Thanks for all of the input. I guess a little more detail is needed. I actually lived in the house from the early 80's to the early 90's. My parents then sold the house. Last year, I purchased the house back from the people who bought it from my parents. I know for a fact that the house has never flooded. There was an instance back in the 80's where we had water at the front of our subdivision but at least 50-100 yards away from the home. We tried to transfer the previous flood policy ($450/year) but FEMA required a new elevation certificate. IIRC, we are 2 feet below sea level. However, I really feel that it is unlikely we would flood but there is always a chance.

2 feet below sea level or 2 feet below your zone's base flood elevation?

I'd recommend talking it over with your agent more than anything. And maybe think about lowering your contents coverage since it's not insured at replacement cost and rather is at actual cash value. You lose a house full of personal property that's two years old and cost you $80,000, you're not getting anything close to that. The depreciation is just like a new car losing value the second you drive it off the lot. That might be a better way to save money than raising the deductibles.

 

[dtc]

There is a fine line though....NFIP policy carries an 80% co-insurance clause.

So you MUST insure to within 80% of the value in order to not be penalized in the event of a loss. So homeowners need to make sure they arent under-insured as well. ( outside 80% of the value of the home )

As to the OP, i think it has been touched on. Risk tolerance. What you will also find is the move from $1250 to say $5000 is not dollar for dollar. You might save $300 but just increased your deductible by $3750. Talk it over with your agent.

Right.

I wish agents would do a better job explaining the NFIP program.

Your purchase price is not the same as replacement cost.

First, purchase price includes the lot and improvements that are outside of the footprint of the house and not covered by flood insurance. It's also not an agreed value policy where a total loss equates to payment of the policy limits.

If you have a 2000sq ft house you paid 150k for 10 years ago and you carry 150k in insurance, you are totally under insured. THat house in almost any condition costs 200k to replace plus the cost of demo. Driveways, pools, fences, plants and sod, sprinklers are all excluded, but if you are only carrying 150k in insurance and you have a claim, that 20% penalty will kill you.

 

[rajncajn]

There is a fine line though....NFIP policy carries an 80% co-insurance clause.

So you MUST insure to within 80% of the value in order to not be penalized in the event of a loss. So homeowners need to make sure they arent under-insured as well. ( outside 80% of the value of the home )

As to the OP, i think it has been touched on. Risk tolerance. What you will also find is the move from $1250 to say $5000 is not dollar for dollar. You might save $300 but just increased your deductible by $3750. Talk it over with your agent.

Also keep in mind that the insurance doesn't only cover the structure of the house, but the contents as well and any demolition that may be required if the house is flooded. So the recorded value of the house isn't necessarily indicative of the cost for replacement.

 

[GW93]

Currently, we live in an AE flood zone. I’m looking to save a little money if it makes sense. Right now, I have a $1250 deductible on a $250,000 policy which is $2200/year. Do I really need that low of a deductible? We would likely save over $1K year if we raise it to $10K. Just wanted to see what some people who have dealt with this thinks. Thanks for any input!

That sounds like an extremely high deductible. If you have the $10K already saved in the event you need it to cover your hypothtical deductible, consider getting your home elevated.

 

[efil4stnias]

Also keep in mind that the insurance doesn't only cover the structure of the house, but the contents as well and any demolition that may be required if the house is flooded. So the recorded value of the house isn't necessarily indicative of the cost for replacement.

Well there is a part for content vs building. However, also note that NFIP is an ACV on Content and RC on building UP TO $250,000.

If you want RC on the home in excess of $250,000, you would need an "excess flood" policy.

So if his home is $275,000, the max amt NFIP would pay is $250,000 since its capped at $250,000 for residential properties. Conversely, content is ACV ever time.

 

[Complex Kid]

2 feet below sea level or 2 feet below your zone's base flood elevation?

I'd recommend talking it over with your agent more than anything. And maybe think about lowering your contents coverage since it's not insured at replacement cost and rather is at actual cash value. You lose a house full of personal property that's two years old and cost you $80,000, you're not getting anything close to that. The depreciation is just like a new car losing value the second you drive it off the lot. That might be a better way to save money than raising the deductibles.

I don't think it depreciates as much as a new car. When our home flooded in April the amount of depreciation for contents wasn't as much as I though it would be.

Another thing to consider with contents is that is all YOUR stuff. So when the adjuster comes out and your check is sent to you for contents it's made out to you and only you.

With the structure it's made out to you and your mortgage company (if you are still paying on your home). So that means when you get that check (which takes longer to get than the contents) you have to send that check to your mortgage company and they sign it and will either send it back to you or put it in a trust and cut you checks to get certain %'s of your house done. While you are waiting on the structure's check you can use the contents money to get the ball rolling with contractors and what not.

 

[insidejob]

I don't think it depreciates as much as a new car. When our home flooded in April the amount of depreciation for contents wasn't as much as I though it would be.

Another thing to consider with contents is that is all YOUR stuff. So when the adjuster comes out and your check is sent to you for contents it's made out to you and only you.

With the structure it's made out to you and your mortgage company (if you are still paying on your home). So that means when you get that check (which takes longer to get than the contents) you have to send that check to your mortgage company and they sign it and will either send it back to you or put it in a trust and cut you checks to get certain %'s of your house done. While you are waiting on the structure's check you can use the contents money to get the ball rolling with contractors and what not.

Oh, I know. I've been selling mainly personal lines P&C insurance for the past 12 years. I was just using the new car thing as an example because it's common to everyone when it comes to depreciation. A lot of it also depends on the adjuster, your receipts and proof of contents - Katrina was a disaster since lots of contents floated away. We recommend that clients take a video of all their personal property and keep it somewhere not in the house.

It was just a suggestion to look at since most policies go for the 250/100 building/contents limits even though a lot of people don't have anywhere near $100K in personal property opposed to raising his deductibles to $10,000.