Most people don’t even contemplate flood insurance costs unless they’ve lived in a home where flood insurance is a necessity. For people who’ve bought homes in a flood plain, the lending company that holds your mortgage will mandate flood insurance coverage. There is a legitimate reason for this – serious flooding can result in damages enough to debilitate a homeowner financially. Mandating flood insurance protects the bank’s investment, as well as the homeowner’s own interest.
Basic Information on Flood Insurance
Most consumers don’t realize what their flood insurance covers until catastrophe actually strikes. There are some parameters to the way flood insurance policies are written.
- Personal Possessions. Flood insurance does not cover any personal possessions. Many homeowners who find flooding to be a problem take out sewage and backup or other policies to help defray the cost of possessions in the event of a flood. Standard homeowner policies do not cover any loss of possession or damage from flooding so it’s advisable to speak to an insurance agent to see what the best coverage for your property might be.
- Basement. Nothing in a basement is covered under flood insurance. That might even include drywall. Often the policy will cover the cost of cleaning and removing water but may not include the remodeling of a previously finished basement. Usually the only things covered in the lower level of a home are mechanical, such as HVAC and hot water heaters.
- Sewage Backup. Flood insurance also does not cover sewage backup. If the water came up through plumbing, it’s likely that a flood insurance policy will not cover the damage. For most policies to cover, the water needs to come into the home through doors, windows, or cracks in the foundation.
For many homeowners, flood insurance isn’t a choice they make to protect their home and possessions. Instead, it’s an insurance they need to have because their property resides in a flood zone. A flood zone is actually an area known to be a high risk for flooding as determined by the Federal Emergency Management Agency or FEMA. Once your property has been listed as in a high risk flood zone, it’s mandatory that you carry flood insurance in order to satisfy the requirements of your home loan. For homeowners who own their home outright there is no mandate to buy insurance, it’s merely an option they might want to pursue to better protect their own assets.
There are certain detrimental aspects to owning a home listed in a flood zone. The cost of flood insurance is exceptionally high, much higher than most standard homeowner’s policies, which makes the property more difficult to sell. New buyers generally need a mortgage and a flood zone necessitates a much higher yearly expenditure in insurance.
Another thing of note – mortgage companies once only mandated that owners held a policy which covered the cost of their loan. If, for example, you only owed $60,000 on the mortgage for your home, that would be the highest policy that they could insist that you purchase. Many mortgage companies have since switched to insisting that the full value of the property is covered under flood insurance, which can essentially double or triple the premiums.
Flood Insurance and Force-Placed Lawsuits
For someone who resides in a flood zone, carrying flood insurance is a non-negotiable part of your mortgage requirement. However, many banks and lending institutions have been found guilty of attaching force-placed insurance on their customers. In these scenarios, the bank has essentially made a deal with an insurance agency. The two entities then inflate the insurance premiums and customers pay far higher than they would through private insurance. The policy premium is often added to the homeowner’s monthly mortgage bill. The lending institution pays the premium to the insurance agency in exchange for a commission.
While mortgage companies do have the right to protect their investment, they don’t have the right to collude with insurance entities in order to falsely raise the rate of premiums and force their own customers into these higher rates. In recent years, force-placed insurance settlements have been reached against such well known institutions as Wells Fargo, Citigroup, and Bank of America.
Do You Believe You’re Entitled to Damages From Force-Placed Flood Insurance?
Our firm has a successful track record of handling flood insurance lawsuits. If you believe you have a case for force placed flood insurance, contact our law firm today or fill out your free case review.