A torrent of opinions on federal flood insurance

Friday, September 24, 2021, Vol. 45, No. 39

For those who have grown weary of debating vaccinations, insurrections and recent elections, I offer a new subject for debate – flood insurance.

With the recent devastation in Waverly, severe flooding across the country and the catastrophic damage caused by Hurricane Ida, flood insurance claims are flowing into insurance carriers and the Federal Emergency Management Agency (FEMA) from all corners of the nation.

Each year, Realtors roll into Washington, D.C., and plead with legislators to pass bills that extend flood insurance another year, preferably two or three. While many members of Congress are eager to sponsor the legislation and support it, there are those who feel the government should get out of the flood insurance business.

Their argument is that flood insurance is required by lenders for properties that are located in an area designated by FEMA as a flood plain. Some feel that building a house in a flood plain should require that the homeowner accept the risk of flood and that the owner should fund any repairs resulting from rising waters.

After all, a person with multiple traffic violations is not able to purchase car insurance. People with terminal illnesses are not candidates or life insurance. “Why,” they ask, “should a property in an area that has a likelihood to flood be insurable?”

For one thing, there is a difference in a floodway and a flood plain. FEMA defines a “regulatory floodway” as a “channel of a river or other watercourse and adjacent to land areas that must be reserved in order to discharge the base flood without cumulatively increasing the water surface more than the designated height.”

Homes cannot be built in a floodway but can be built in a 100-year flood plain with the proper insurance, assuming there is a loan on the property. Flood insurance is not mandated simply by owning the land, but lenders require flood insurance when they are insuring the property.

Following the flood of 2010, many homes that flooded were constructed on properties not in the flood plain at the time and, consequently, the homeowners did not have the dwellings – as the insurers like to say – covered by flood insurance.

When Gov. Phil Bredesen requested President Barack Obama declare a disaster status for the area, those homeowners without flood insurance were granted funds from the federal government through a disaster relief program.

Many uninsured residents were surprised to learn that the maximum they could receive at that time was just less than $30,000, even if their houses were totally destroyed. Many learned their insurance policies could have covered the houses if they had purchased additional flood coverage.

Lauren Stansbury, an insurance executive with Elite Insurance Solutions, warns that “water is the most extreme of the elements.” She notes flooding is where they “see the most damage” to homes.

Stansbury says that policies are available that insure properties over and above the amount the standard flood insurance policy purchased through FEMA would allow. A standard flood policy provided by FEMA would cover $60,000 for a residence, but Stansbury says that could be raised by $190,000 allowing for $250,000 in additional coverage.

While the flood in Waverly was a rare and unexpected occurrence, those living in Louisiana, Mississippi and Florida continue to be pelted by hurricanes and severe weather. There are the stories of residents who had recently completed reconstruction of their homes only to have the homes destroyed yet again.

With weather patterns changing – more debate opportunities available on climate – and the storms becoming more devasting and occurring with more frequency, the Emergency Relief Fund must continue to expand if the residents, aka citizens and constituents, are going to be protected by the federal government.

With the political parties divided on everything else, perhaps these disasters will bring unity to Congress, although I would not bet on it.

Sale of the Week

The house at 5300 Illinois Avenue did not flood last week and, chances are, it will not. Darbi Bolton, one of the stars at Berkshire Hathaway HomeServices Woodmont Realty, teamed with co-star Teryn Chapin of Keller Williams Realty to sell the home for $584,000 in a matter of hours, even though the list price was $537,900.

This sale for $46,100 more than list price speaks to the continued ferocity of the market, which is not slowing when measured by the manner and speed of buyers attacking listings.

In Germantown, a home listed for $745,000 sold for $100,000 more than list this weekend, with another in Sylvan Park experiencing a similar result.

The Illinois house has 1,946 square feet with three bedrooms, two full bathrooms and a half-bath. This property is a single-family home, not a horizontal property regime (HPR).

Richard Courtney is a licensed real estate broker with Fridrich and Clark Realty, LLC and can be reached at richard@richardcourtney.com.