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What You Should Know About Flood Insurance

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What You Should Know About Flood Insurance
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South Florida residents purchase over 900,000 flood insurance policies through the National Flood Insurance Program (NFIP) at a cost of over $252 million every year. Insurance requirements imposed by mortgage companies are the basis for the vast majority of these policies and premiums.

Correcting inaccurate Special Flood Hazard Area (SFHA) designations is a viable way to put money back into the economy every year. Consumers have a better understanding of their true flood risk and the right to buy an amount of flood insurance they want instead of an amount dictated by their mortgage companies. Flood zone correction even entitles policyholders to a refund of the current year's premium as long as they have not filed a claim during the current year. Subsequently, they can decide on a level of coverage that best meets their needs and budgets. The residential savings amount to substantial savings, an average of $15,000 over the course of a 30-year mortgage.

If your mortgage company and/or insurance agent claim that your home is in a SFHA, we strongly recommend that you perform a flood risk analysis. See how your home's flood risk compares to FEMA's risk assessment of the SFHA within which your home is located. The benefits can be substantial: (1) you know your true flood risk, (2) you correct your flood zone classification if it's wrong, and (3) you have the power to decide the amount of flood insurance you want instead of an amount dictated by your mortgage company.

Flood insurance requirements imposed by mortgage companies force South Florida residents to pay over $252 million every year to maintain over 900,000 flood insurance policies. Based upon our experience, over 90% of these flood insurance requirements should not exist. Your policy may be one of the 810,000 policies that should not be required. South Florida residents should further scrutinize these requirements on the basis of claims and claim payments. Over a 25-year period, South Florida property owners have filed 49,679 claims, with 30,377 claim payouts for a grand total of $329 million (an average of $13 million per year). That's a big discrepancy between what South Florida puts into the NFIP and what South Florida receives in NFIP claim payments, especially when you consider events like Hurricane Andrew.

The NFIP statistics are the strongest indicator that the vast majority of the homes in South Florida were built responsibly to protect against catastrophic flood events and, therefore should not be the in the SFHA. If your home has been free of flood damage since you've lived there, it probably does not belong in the SFHA.

Pursuing flood zone correction will make you a more educated flood insurance consumer and the savings generated may make significant contributions to a child's college fund, a retirement savings account, or an annual vacation budget.

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