What About Insurance for my Home?
Homeowners’ common insurance concerns;
What do I cover, how much should I get?
The most important thing to remember is to get your insurance information from an insurance professional, not your neighbor, your mortgage company, or the media.
Professional Realtors © will advise you to review your homeowner coverage with an insurance provider or broker. Among the local large property insurance brokers in our marketplace are Coastal Plains Insurance, Kinghorn Insurance Services, Carswell Insurance Services, Lowcountry Insurance Services and many others. Insurance companies will also give you information.
Flood Insurance—Should I have it, do I need it?
This is one of the most important issues underscored by substantial damage from Katrina and other recent storm disasters. What everyone should know is that homeowners’ insurance may not include flood damage, or wind and hail damage. If you have insurance on a home now, make sure you know what coverage you have.
If you are locating near a coastal area, lenders usually require flood insurance if your home is located in a high-risk flood zone. Flood zones are geographic areas that the Federal Emergency Management Agency (FEMA) has defined according to varying levels of flood risk. These zones are depicted on a community’s Flood Hazard Boundary Map or a Flood Insurance Rate Map (FIRM). Each zone reflects the severity or type of flooding in the area. An excellent website is www.floodsmart.gov, an official site of the National Flood Insurance Program, a division of FEMA. It has excellent, detailed information on flood zones. If you have a home now, you can use a menu on that site to rate your individual property’s flood zone immediately.
Many prospective buyers of homes may hear from a lender that it is not required to have flood insurance if the home is in a low to moderate risk zone. But just because a lender might not require flood insurance, doesn’t mean you shouldn’t consider having it. What is it? Here is what it is according to the National Flood Insurance Program of the U. S. Government:
“A general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties (at least one of which is the policyholder’s property) from:
Overflow of inland or tidal waters; or
Unusual and rapid accumulation or runoff of surface waters from any source; or
Mudflow; or
Collapse or subsidence of land along the shore of a lake or similar body of water as a result of erosion or undermining caused by waves or currents of water exceeding anticipated cyclical levels that result in a flood as defined above.”
So, in plain English, a flood is an excess of water (or mud) on land that is normally dry. In this tropical area, if there are several inches of rain in a short time, flooding could occur that could inundate homes in low to moderate risk flood zones. If the owners did not have optional flood insurance, they would not have insurance coverage for flood losses. Much of greater Bluffton is in the low to moderate risk, while Hilton Head Island is high risk. In low to moderate risk flood zones, flood insurance is affordable. In addition, there is a “flood pool” of companies that could provide coverage. The smart conclusion is to review this issue with your professional insurance agent.
What about Wind and Hail Coverage?
Wind and hail coverage is included in some homeowners’ insurance policies, and is not in others. Again, check your policy and ask your insurance agent or broker to find out what coverage you have. If a company will not offer wind and hail coverage, it is available as a separate policy. There is also a “wind pool” which also offers coverage if not available as part of homeowners’ insurance policies. If you are buying a home in this area, be informed as to what is available and what you should consider. I am a buyers’ agent. If I represented you as a buyer client, I would review these issues with you, and I will always advise that you or any prospective homeowner review insurance coverage carefully with their insurance broker or company.
What amount is appropriate for coverage of my home?
Again, review this with your professional insurance broker or insurance agent when you purchase insurance on a home. Most owner occupied homes are insured for replacement value. Do not guess about what that should be. Do not use an appraisal you may have on the home, since in an appraisal, a structure is appraised at a depreciated value, which takes into consideration a “useful life” of a home. In plain English, the older a home, the lower value it will have in an appraisal. Do not base a decision on the amount the home will sell for, as that takes into consideration the value of the land along with a home and what you are insuring is the amount it would take to replace or rebuild your home.
The most important cost to be considered is what it would cost, in today’s market, for a home to be constructed or rebuilt. The price per square foot that it would take to re-build a home is a core consideration. Moreover, insurance companies often include an inflation factor so that the replacement cost will keep up with the rise in construction costs. In conclusion, the best source of information to protect against loss of what is, for most people, the most important investment they have is your licensed, professional insurance agent or broker.
Lynn Castner, March 2007
