The Great Insurance Debate, Part 2

On November 20, 2005, I wrote an article about how insurance problems are hurting people because we need several policies to feel covered, but when a major event happens, we find out we were not covered properly.   I called that article, “The Great Insurance Debate.”  Friday night, I went to FEMA meeting at Pineland High School and I felt that same frustration that I saw on the faces of the victims of Sandy that were on the victims of Katrina seven years ago.  Our insurance policies do not help people the way that insurance policies originally intended to do.

At the meeting last night, I found out new flood maps were being worked on the past two years that contained information about storms (not Sandy) that showed properties may have flood problems that were not available to homeowners or their mortgage company when they purchased their home.   If the information was available, some of the people at the meeting might have had flood insurance.

Other issues that were discuss during the meeting and the results as I see them are:

  • First; second homeowners, sorry no money is available to help you at this time.  That may change but do not count on it.
  • Second, the new federal regulation that deals with insurance rates does not contain the word “grandfather” anywhere in the regulations, so the old rules about being “grandfathered in” is not part of the new regulations.  The grandfather clauses in the old laws are dead when the local governments accept the new FEMA regulations.   So rates that were “grandfathered in” will no longer apply and the rates will go up. The flood insurance premium rates will go up 25 percent each year until the insurance amount becomes equal to the “actuary amount” need to protect the home base on how high your house is above the mean sea level.
  • Third, do the local governments have to adopt the new FEMA regulations?  No, they do not but local areas will be out of the federal flood program in two years, if they do not adopt the new regulations into law.  So, all local governments will have to accept the new regulations with the new flood maps.
  • The last issue that was in the minds of all the people that were in attendance, should the local government accept the new regulation and change zoning rules fast so they can have redevelopment that makes us safer in the long run?  I think this might be a good idea.  But haste is not always best, and in this case it depends on clarifying how people need or want to rebuild.  Which brings us to the definition of “substantial damage.” One definition that can be used is 50 per cent of market value the other is 50 per cent of assessed value of the improvements, which in some cases can be considerable below the market value.  Why is this important?  If your house is determined to be substantially damaged, it needs to be raised to the minimum requirements.  Some houses cannot be raised so they will have to be demolished even if they are well below 50 per cent of market value.  In other cases it is good to have your house determined to be substantial damage because then you would qualify for 30,000 dollars to raise your property (sorry second homeowners you do not qualify for this).   Which brings us to the cost of raising a house, one homeowner said that she received a price of 80,000 dollars.   For some houses this is more than the assessed value.  I would hope that smaller units would be priced much lower than that.

So trying to determine what you need to do here is a quick check list and you can pick only one:

  1. Rebuild at the height it is now, your final flood insurance rate will be based on the “actuary amount” rates and remember that you will soon not be “grandfathered in” so rates will go up. Also to rebuild, you cannot have “substantial damage” so check with city hall quickly about the definition.
  2. Raise your house, if you want better flood insurance rates or if you had “substantial damage.”  If you think the 30,000 can help you to raise your house you need to check with city hall quickly about the definition of “substantial damage.”
  3. Still confused or cannot decide than wait six months as the money problems and regulations will be determined and laws rewritten that will determine what your neighborhood will look like in the near future.

Let’s cover everyone, everywhere the right way!  We need to evaluate high risk areas and I think everyone agrees to that, but we need to do it with one vision and one insurance that does not delay people receiving money, the money they are in need when they need it.

David Jungblut, Ocean City