What High Home Prices Mean for Your Clients’ Flood Insurance Needs

This post is part of a series sponsored by SWBC.

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

The average price of newly listed homes, which had peaked at around $389,400 in 2019, soared to over $443,200 in August 2021. The average price of new homes has risen 13.5% since March 2021 and 26 .5% compared to March 2020.

What is the impact of rising home values ​​on your policyholders? For one thing, if the value of their home has increased significantly over the past two years, their standard flood insurance policy may no longer provide adequate protection for their needs.

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

With another above-average hurricane season expected in 2022, many of your policyholders could be dealing with the fallout of rebuilding after a big storm. If the cost of rebuilding their home exceeds the standard policy limit of $250,000, they may want to consider purchasing excess flood insurance.

Understand your policyholders’ flood risk

Given the increasing occurrence of extreme weather events in America, virtually everyone is at risk of flooding. As a trusted insurance agent, it’s crucial to know what level of risk your clients’ homes could potentially be exposed to so you can continue to help keep them safe and point them in the right direction. for the cover.

Homeowners can find out if their property is at low, medium, or high flood risk on the Federal Emergency Management Agency (FEMA) site. The map is divided into zones which are used to help establish key rates.

Although most lenders do not require homes outside FEMA-designated special areas (Zones A and V), approximately 25% of all flood damage occurs in low-risk areas outside of the mapped flood zone.

In fact, when Hurricane Harvey made landfall in Houston in 2017, it tore through over 200,000 homes, leaving over $125 billion in total damage. Of these dwellings, 80% were located outside the 100-year floodplain. This means that the vast majority of these homeowners had no flood insurance coverage.

Other flood risks

As the example above shows, living outside of a high-risk flood zone does not necessarily mean that they are immune to flood damage. Flooding can result from poor drainage systems, storms, snowmelt, construction, and damaged water pipes.

Regardless of how flood damage occurs, flooding is one of the costliest disasters to overcome. While many homeowners have standard coverage through FEMA’s government-funded National Flood Insurance Program (NFIP), even those policyholders may be surprised to learn that a standard policy often offers insufficient funds to repair, rebuild or replace the contents of a home.

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

The cost of rebuilding a home after a natural disaster is rising

If your insured’s home is damaged or destroyed in a flood, the insurer will reimburse 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 the contents of the home—is determined by the square footage of the structure, the amount of water, and the cost of labor to repair.

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

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

Given these recent trends, it is wise to advise your clients to determine the amount of flood cover they need based on the total running the costs of rebuilding the physical structure of the house, the surrounding structures and the personal contents of the house.

Coverage for your customers

As an insurance agent, your clients look to you to protect them and their home in the worst-case scenario. As property values ​​continue to rise, excess coverage that goes beyond the standard NFIP policy limit will become more relevant than ever to your policyholders. Work with SWBC to help your customers get the flood protection they need. Visit our website to find out more.


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