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What higher home prices mean for your customers’ flood insurance needs


This post is part of a series sponsored by SWBC.

In the past couple of years, many homeowners have seen a massive rise in the value of their homes. Between 2019 and 2020, the median home price increased by only $20,400, but between 2020 and 2021, it increased by $40,200. From 2021 to 2022, its price increased to more than $46,700, bringing the median home price to $357,300.

The median price of newly listed homes, which settled around $389,400 in 2019, increased to more than $443,200 in August of 2021. Median new home prices are up 13.5% since March 2021 and 26.5% compared to March 2020.

How does increasing home values ​​affect the insured? For one thing, if their home’s value has increased significantly in the past two years, their standard insurance policy may not provide enough protection for their needs.

Floods are the most common type of natural disaster that affects homeowners in the country. According to FEMA, just one inch of home floodwater can cause over $25,000 in property damage! Despite this, homeowners’ insurance does not cover flood damage.

With an above-average hurricane season expected in 2022, many insured could deal with the fallout of rebuilding after a bad storm. If the price to rebuild their home exceeds the standard policy limit of $250,000—they may want to consider getting additional flood insurance.

Understand the flood risks to the insured

With the increasing incidence of extreme weather events in America, nearly everyone is at risk of flooding. As a trusted insurance agent, it is essential to know the amount of risk your clients’ homes may face so that you can continue to help keep them safe and point them in the right direction of coverage.

Homeowners can find out if their property is at low, medium, or high flood risk on the FEMA website. The map is divided into regions that are used to help determine policy rates.

While most lenders do not order homes outside of FEMA-designated Special Flood Risk Zones (Zones A and V), approximately 25% of all flood damage occurs in low-risk areas that lie outside the designated flood zone.

In fact, when Hurricane Harvey reached Houston in 2017, it destroyed more than 200,000 homes leaving more than $125 billion in total damages. 80% of these homes are outside the 100-year flood plain. This means that the vast majority of property owners did not have any flood insurance coverage.

Other flood hazards

As can be seen from the example above, living outside a high-risk flood zone does not necessarily mean they are safe from flood damage. Floods can result from poor drainage systems, storms, snowmelt, and damaged construction and water lines.

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

Most standard flood insurance policies only provide coverage for residential property up to $250,000 with a maximum content coverage of $100,000. Getting private flood insurance can provide your insureds with a higher level of coverage for homes and properties.

The cost of rebuilding a home after a natural disaster is on the rise

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

The price of water damage—not including the cost of replacing any home contents—is determined by the square foot of the structure, the amount of water, and the labor cost of the repair.

*The above chart is based on the amount of water in a 2,500 square foot home.

Unfortunately, due to the high cost of almost everything needed to build a house, these days, from lumber and materials to labor, the total costs of rebuilding a house have increased dramatically (13.6%) in the past two years. The cost of building materials alone has increased by 28.7% since 2020.

Given these recent trends, it is a good idea to advise your clients to determine the amount of flood coverage they need based on the total current costs of rebuilding the physical structure of the home, surrounding structures, and the personal contents of the home.

Cover for your customers

As an insurance agent, your clients look to you to help protect them, protect them and their homes in the worst case scenario. As property values ​​continue to increase, excess coverage beyond the limits of a standard NFIP policy will become more relevant to your insured than ever before. Work with SWBC to help your customers get the flood protection they need. Visit our website to find out more.

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