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What high housing prices mean for your customers’ needs for flood insurance



This post is part of a series sponsored by SWBC.

Over the past two years, many homeowners have seen the value of their homes skyrocket. Between 2019 and 2020, the median price of a home rose by only $ 20,400, but between 2020 and 2021, it rose by $ 40,200. From 2021-2022, they rose above $ 46,700, bringing the median house price to $ 357,300.

The average price tag for newly listed homes, which had a plateau around $ 389,400 in 2019, rose to more than $ 443,200 in August 2021. Average prices for new homes have risen by 13.5% since March 2021 and 26.5% compared to with March 2020.

How do rising home values ​​affect your insured? First, if the value of their home has increased significantly in recent years, their standard flood insurance can no longer offer adequate protection for their needs.

Floods are the most common type of natural disaster affecting homeowners in the country. According to FEMA, just one inch of flood water in a home can cause over $ 25,000 in property damage! Despite this, home insurance does not cover damage caused by flooding.

With yet another hurricane season above average predicted in 2022, many of your insured can deal with the fallout from the rebuilding after a severe storm. If the price of rebuilding their home exceeds the standard insurance limit of $ 250,000 ̵

1; then they may want to consider getting a flood insurance policy.

Understand the flood risk of your insured

Given the growing prevalence of extreme weather events in America, virtually everyone is at risk of flooding. As their trusted insurance agent, it is crucial to know how much risk your customers’ homes can potentially face so that you can continue to help keep them safe and point them in the right direction for coverage.

Homeowners can find out if their property has low, medium or high risk of flooding on the Federal Emergency Management Agency (FEMA) website. The map is divided into zones that are used to determine policy rates.

While most lenders do not require housing outside FEMA’s designated special flood risk areas (A- and V-zones), approximately 25% of all flood damage occurs in low-risk areas outside the mapped flood zone.

In fact, when Hurricane Harvey landed in Houston in 2017, it ravaged over 200,000 homes, leaving more than $ 125 billion in total damage. Of these homes, 80% were located outside the 100-year floodplain. This means that the vast majority of these property owners did not have any flood insurance.

Other flood risks

As shown in the example above, living outside a high-risk zone does not necessarily mean that they are safe from flood damage. Floods can be due to poor drainage systems, storms, melting snow, construction and damaged water mains.

No matter how flood damage occurs, flooding is one of the most costly disasters to recover from. While many homeowners have standard coverage through the state-funded National Flood Insurance Program (NFIP) from FEMA, even these policyholders may be surprised to learn that a standard insurance policy often offers insufficient funds to repair, rebuild or replace the contents of a home.

Most standard flood insurance policies only provide residential property coverage up to $ 250,000 with a maximum content coverage of $ 100,000. Obtaining a private flood insurance can offer your insured a higher coverage for homes and belongings.

The cost of rebuilding a home after a natural disaster is increasing

If your insured’s home is damaged or destroyed in a flood, the insurer will reimburse them for the cost of rebuilding the house back to its original specifications before the damage occurred.

The price tag for water damage – not including the cost of replacing the contents of the home – is determined by the square footage of the structure, the amount of water and the cost of work to repair.

cost of flood damage diagram

* The diagram above based on the amount of water in a 2,500 square meter home.

Unfortunately, given the rising cost of almost everything needed to build a home, nowadays, from timber and materials to work, the total cost of rebuilding a home has increased significantly (13.6%) over the past two years. The cost of building materials alone has increased by 28.7% since 2020.

Given these latest trends, it is a good idea to advise your customers to determine how much flood protection they need based on total current costs for rebuilding the home’s physical structure, surrounding structures and personal content in the home.

Coverage for your customers

As an insurance agent, your customers look to you to help protect them and their homes in the worst case. As property values ​​continue to increase, coverage that goes beyond the standard limit of NFIP insurance will be more relevant to your insured than ever. Work with SWBC to help your customers get the flood protection they need. Visit our website to learn more.

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Flood

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