By Elaine VonCannon, ABR, SRES, Associate Broker, Notary, Team Leader, Property Manager, Award Winning Agent
Choosing the best insurance policies for your home can cause a lot of confusion. Many homebuyers are not fully educated about the coverage needed to protect a home or real estate investment. Many difficult situations can be caused by natural disasters. If you purchase real estate in or relocate to an area prone to hurricanes or floods it is important to know you have sufficient coverage. Read your policy carefully, ask questions and know the facts. Consider all of the options and get the advice of a real estate or insurance professional you can trust.
Come Rain Or Come Shine
Hurricane insurance is also referred to as Wind and Hail insurance and it works to cover the cost of rebuilding your home in the event of hurricane damages. Knowing the full extent of your coverage is essential. First choose the best deductible. Homeowners can purchase Wind and Hail insurance with a deductible based on a percentage of damages that may occur. This deductible will increase as the amount of damages increases. The monthly payments are often lower, but the out-of-pocket expense is higher. Homeowner's can also purchase hurricane insurance with a fixed "all peril" deductible. This means whether you have $2000 of damage or $50,000 you pay the same deductible. You may pay a higher monthly payment, but in high-risk areas an "all peril" deductible can save thousands of dollars.
You should also be certain your policy contains specific coverage such as Loss of Use. This provides funds for you to return to your home and it can even cover a dwelling on your property while you reconstruct. The amount you are paid depends the value of your home. Contents Replacement Cost is another form of coverage that can be beneficial. It allows you to have your items replaced at the current value. You can choose to receive cash as well, but the cash value of the items is subject to depreciation. A Living Expense Clause is another good option for protection. It provides homeowners with an income while recovering from hurricane damage and loss.
When The Waters Keep Rising
Flood insurance and hurricane insurance are separate policies. Flood insurance is a product of the National Flood Insurance Program, which is part of FEMA. Flood insurance cannot be paid by escrow it must be paid up front by the insured. According to the official website of the National Flood Insurance Program (NFIP), www.floodsmart.gov, flood insurance covers "structural damage and mechanicals...flood debris cleanup and floor surfaces like tile and carpeting." You can purchase more coverage to insure personal property, such as furniture and appliances. In order to purchase a flood insurance policy homeowners and real estate investors must own in a low-risk or high-risk community that participates in the NFIP. There are three standard Flood Insurance policy forms offered by the NFIP: the Dwelling Form, the General Property Form and the Residential Condominium Building Association Policy form. Each policy is based on how the building is occupied.
When Disaster Strikes
If a natural disaster occurs in your region and many residents suffer damage by wind or flood there are many options for homeowners in financial trouble. The US Department of Housing and Urban Development has a special insurance program that falls under Section203(h) of the National Housing Act to assist disaster victims. You can learn more about this program at www.hud.gov. Lenders such as Freddie Mac and Taylor, Bean & Whitaker also offer special programs to assist disaster victims. Many lenders have encouraged mortgage brokers to suspend late fees and delinquency penalties for hard hit coastal areas. They have also enacted grace periods so homeowners can refrain from making mortgage payments and avoid being reported to the Credit Bureau. Also, many states have emergency management departments that work with FEMA is situations like Hurricane Katrina. These agencies, like the Virginia Department of Emergency Management, can be of service to any homeowner in Virginia living in a region declared a Major Disaster Area by the President of the United States.
When you invest in real estate it is essential that you understand the types of insurance coverage that will best protect your property. Research your region and get advice from the professionals. To learn more about homeowner's insurance please read "Dangerous Liaisons: Tips For Securing Homeowner's Insurance".