Bankruptcy

Oil Spill Making Flood Insurance Difficult to Come By

By Chris Kramer

The price of premiums for flood insurance for homeowners is on the rise and extra coverage is going to be harder to get, with the coming hurricane season and Gulf oil spill are making insurers more wary, according to the Wall Street Journal.

In general, the price of homeowner?s insurance is on a significant rise. Thomas J. Crowley, an independent insurance agent in New York was quoted saying, "the average price of a homeowner policy on Long Island is above $2,000 a year now, five years ago it was probably half that? my own policy has doubled in five years to over $3,000."

One of the main concerns for this year?s hurricane season is the oil spill in the Gulf. Most standard homeowners? policies would not cover contamination done by the oil in the case of a flood, which could cause even more destruction than the standard high winds and rain.

According the Robert Hartwig, president of the Insurance Information Institute, "In general, whatever is mixed in with the water is part of the flood, hence excluded from a [traditional] homeowner policy."

Congress has failed to renew the National Flood Insurance Program, which is responsible for providing the vast majority of flood policies in the U.S., after it expired on June 1st.

An estimated 1,200 real-estate closings a day have been delayed this month because of the inaccessibility to flood insurance coverage, according to the National Association of Mutual Insurance Companies. Federal law requires homes with federally backed mortgages in designated ?flood-hazard? areas to have flood insurance, and without the NFIP, many homes can?t get flood insurance.

If you?re in the market for hurricane-related coverage, you should always be sure you have enough insurance to rebuild fully if the worst happens. Your cost to rebuild may be different than the market value of your house, and you shouldn?t wait until you need the money to find out that your policy hasn?t kept up with the cost of construction.

Another good tip is to fully understand your deductibles. Hurricane and wind deductibles can vary greatly, from 1% to 5%, depending on the state. On a $300,000 house, the difference between having to put up $3,000 and $15,000 can be a game changer.

One cost that can catch a storm victim by surprise is emergency living expenses. If your house is unlivable for several months, you need to make sure you can cover your expenses.

It may seem difficult in this economy to spend the money on a good homeowners insurance policy, but as Chari and Bob Hust found out, it can be more than worth it.

After Hurricane Ike caused significant damage to their two houses in Texas in 2008, the couple received combined over $600,000 to repair the houses. They essentially ended up rebuilding their houses, but they had no problem settling their claim with the insurance company. ?You may pay more? but if you have a catastrophe, it is worth having the right insurance,? said Chari.

If a hurricane-related flood causes more damage than homeowners can afford, it could result in home foreclosure, and even bankruptcy.

Full post as published by The Bankruptcy Blog on June 25, 2010 (boomark / email).