Yes, it was a soggy, rainy summer all across the nation. Surely it ruined many a weekend at the Hamptons (if you go there- I do not). If you had deadline to finish a book looming overhead, well then this was a perfect summer (mine). Be that as it may, the many inches of rain created a stir at federal agencies and mortgage lenders abound and they collectively decided to increase the insurance coverage needed in case of flooding. Apparently, brooks and streams have been overflowing into people’s basements and rivers have simply been washing away entire neighborhoods. I am not being smarmy, because it is true, however do they have to increase yet another expense to the homeowner now! Recently, the Federal Government came out with a 151 page guidance on properties located in flood zones and the suggested coverage changes. There are designated flood zones outlined on maps which show areas that have potential to flood due to overflowing arteries or excessive rain. These maps are created by engineers and used as guidelines for coverage.  They do adjust over time due to changes in the geography. Recently, there has been cause for a change and it is outlined in this huge book. Wow, who has time to read that one?  To sum it up (how it effects the consumer), here are just a few highlights:

• If a condo is located in a flood zone, the flood insurance required coverage has been increased from 80% to 100% of the value. This means the premiums will be higher for the homeowner. Think Florida.
• If the property is in a special flood hazard area (SFHA) and the loan is secured by multiple buildings (e.g. primary dwelling, guest house, shed, barn, etc.) with a value of at least $500, then flood insurance coverage is required for each building. Having separate policies can be more expensive than one blanket policy.
• Lenders are now required to compare the flood zone on the Standard Flood Hazard Determination to the zone used on the Flood insurance policy. Under the guidance, lenders must ensure that the flood insurance policy reflects a zone beginning with an A or V. This means that if you did not need it or have it before, your house might now be in the special flood zone area and you will be required to get it.

Not all flood insurance is expensive, it be just a few hundred dollars a year. It depends on how close your home is to a flood area and the chances of damage happening. Flood insurance may almost always be obtained by your insurance agent. It is not a rider, but a separate policy to your homeowner’s insurance. Never allow the bank to get it for you, because it could be three times the amount you would pay for it yourself. When you purchase a new home, the appraisal and lender will research to see if flood insurance is required. It might be obvious to you or a shock (what water?) As a crazy example, after Katrina, a client of mine was required to obtain flood insurance for her home in the Bronx, New York. Now if the Bronx floods, New Yorkers will have much bigger problems than if a steam overflowed in New Jersey. So, if you get a letter from your existing lender, open it. If it contains information about you requiring flood insurance, call your insurance agent and get a quote. You do not want to see your mortgage payment go up a couple hundred bucks because the lender tacked it on.

Dale Siegel