In the aftermath of Hurricane Sandy, big changes are going to be made in the coming year or two.? Flood maps are being revised to reflect the weather risk to not only low lying areas, but areas that are prone to flood during another potential storm surge.? The devestating results in New Jersey is going to see an insurance reform that will take years to reform.
Although flood maps will not be revised until sometime in 2014, you can expect Flood Insurance to go up across the board where it is required.? Once the revisions come out, and those areas newly designated as ?flood-hazard areas?, the new policies issued will begin at subsidized rates and the premiums will increase by 20% a year for five years.
Any home with a mortgage sponsored by the government such as Fannie Mae, Freddie Mac, Veterans Assistance, FHA, etc, will be required to have flood insurance.? Homes without it will be given 45 days notice to place a flood policy on the home, otherwise the mortgage companies will force place a very pricey policy for you.? According to FEMA, the average flood policy costs $625 a year where homes in highest-risk areas cost more then $3,000.? This cost is expected to double.
So what does this mean to Hoboken, Jersey City, and all of the coastal urban areas that have Homeowners Associations in charge of their insurance premiums.? Expect an increase in HOA dues as a result of higher flood premiums.? This isn?t a matter of if, it?s a matter of when.
Now when homeowners are looking at areas like Hackensack versus Clifton, the cost of insurance will now come into play when breaking down the monthly payment and risk assessment.? Now, will another storm like Sandy happen again in NJ?? History says it is very possible since the last 2 years have brought a storm, but all we can do is live our life and hope that it doesn?t.? Homeowners will need to pay extra special attention to their policy especially if they are a primary homeowner or a second home / investor owner.? Policies are written very different.? Remember the terms DP1 and DP2.? Ask what the difference in coverage is.? Also, on primary homes, the coverage is based on replacement cost.? On second homes and investment property, it could be based on depreciable value, a massive difference.? Don?t be fooled or don?t accept just the cheapest policy.? Be sure you understand what your policy covers, know your deductable, and find out what your coverage is if the storm is a hurricane as opposed to just a tropical storm or torrential rain.
The increase in flood insurance could play into the housing crisis, especially in Jersey Shore areas where it would simply be too expensive to maintain a home there with the added cost.? Although coverage for say 100 unit building is way more then a single family home policy, it is still less then 100 single family homes and each unit will pay their share of the increase so the cost effect will be less on buildings who are managed by associations.
As we prepare for higher premiums, we must also take into account that premiums can be mitigated when rebuilding or new construction.? Being compliant with the new revised flood maps issued by FEMA, your flood policy will drastically be lower then those homes that are only compliant and grandfathered into the former building code.? My guess is that homes along flood prone areas will need to be raised 4 feet above where the stand today.? This can be established using extra dirt on your property to build up your home or also elevated on pilings which would give you a crawl space under your home.? There are actually very beatiful designs for homes with this type of elevation in Florida, the Carolinas, etc.? NJ will need to adapt to those type of plans if they want to live along the coast and mitigate insurance costs.
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Source: http://www.newjerseyrealestateguys.com/blog/new-jersey-flood-insurance-big-changes-coming/
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