Homeowners in New Jersey are exempt from costly hurricane deductibles for damages due to Superstorm Sandy, saving homeowners thousands of dollars. The hurricane deductible, typically 2% - 5% of the property’s value, is significant compared to the standard homeowners insurance deductible, usually $500-$1,000.
Homeowners insurance may not be enough to cover your damages due to the storm. People without a separate flood insurance policy can turn to FEMA (Federal Emergency Management Agency), as long as it is regarding their primary residence.
If you do not have flood insurance you may be left severely underinsured and over exposed as homeowners insurance policies typically do not cover losses due to flooding. Keep in mind, even with flood insurance finished basements may not be covered. However, household systems stored below ground level such as a furnaces, central air conditioning units, hot water heaters, sump pumps, and electrical systems are covered under a flood policy.
If you have insurance with the National Flood Insurance Program (NFIP) you may be insured for a maximum of $350,000 for each home (up to $250k for the building and up to $100k for personal property). Know that this insurance coverage does not come cheap to those in high risk areas. An annual flood insurance policy can range from $400 in the lowest risk areas to $7,000 in the highest risk areas.
Premiums for flood insurance are expected to rise in the coming years. The right to raise premiums for flood insurance by as much as 25% per year, over the next five years was granted by Congress this past July. This increase in premiums will be felt largely by those who own vacation homes and other properties that repeatedly flood, as their previous insurance rates were far below market rates and have resulted in claims eclipsing premiums collected.
Flood insurance is mandatory for homeowners with federally backed mortgages for the acquisition or construction of buildings in high-risk flood areas. If you are not in a high-risk area your lender may still require it. Flood maps are currently being revised as they are extremely outdated. Therefore, there is the possibility that your insurer may contact you as flood zones change and require you to purchase flood insurance on your property. Do not rely on mandatory coverage notification before considering a flood policy as nearly 20% of flood insurance claims come from moderate-to-low risk areas and federal grants from FEMA cannot be relied upon to cover any or all losses incurred. If you are not prepared to handle the loss financially you may want to consider additional insurance.
About Encompass/Melissa Maslowski, CFS, CES, CTS:
Melissa Maslowski is President and founding principal of Encompass Financial Advisors, LLC, a Fee-Only financial planning and investment management firm located in Madison, New Jersey and servicing clients nationwide.
Melissa is a graduate of Seton Hall University’s Stillman School of Business. She completed the Fairleigh Dickinson University Certificate in Financial Planning, an 18-month program. In addition, she passed the Series 65 (Uniform Investment Advisor Law) Securities Examination as well as the 10-hour national CFP® Certification examination. Melissa also holds the following financial planning designations from the Institute of Business and Finance: Certified Fund Specialist (CFS), Certified Estate and Trust Specialist (CES), and Certified Tax Specialist (CTS). She is a member of the Financial Planning Association (FPA) and the National Ethics Association (NEA).
Encompass Financial Advisors, a Registered Investment Advisory (RIA), provides comprehensive financial planning and investment management services predominately to career professionals and retirees. Their services encompass all six areas of financial planning: cash flow, investment management, retirement planning, education planning, insurance planning, and estate planning.
Melissa Maslowski, CFS, CES, CTS
Fee-Only Independent Financial Advisor
President: Encompass Financial Advisors, LLC.
235 Main Street, Suite# 130, Madison, NJ 07940