Wednesday, October 31, 2012

Do You Really Need That Flood Insurance?

FEMA Elevation Certificates are used to determine if your house or structure is in a Flood Hazard Area. A lot of Mortgage companies are automatically putting Flood Insurance on houses that may or may not be in a Flood Hazard Area. We can file LOMA (Letter of Map Amendment) to the Federal Emergency Management Agency (or FEMA) on a case by case basis. FEMA will review each LOMA and determine if the structure is indeed out of the FHA and then send a letter stating so. This letter can be used to send to your mortgage company to eliminate FI which can be very costly. In most cases the Mortgage Company will only eliminate the Flood Insurance with an FEMA Certified Elevation Certificate and/or a LOMA.

Why has this become such an issue recently? Over the past few years, homes even outside of the Flood Hazard Area have been damaged or completely destroyed due to unprecedented flooding in some areas. If the home is destroyed by flood and the home owner doesn't have flood insurance, often times the mortgage company is left with the outstanding loan and no way to recover it.

Because of this, Mortgage companies are trying to require flood insurance. Having a FEMA elevation certificate can be the only way to get out of having to pay for expensive flood insurance when you really don't need it. Some areas carry more risk than others and having an elevation certificate can show reduced risk, and trigger the mortgage company to remove the requirement of flood insurance.

Flood insurance can cost from $750.00 per year up to $5000.00 per year and up from there depending on your property, your home value and your risk of flood. The only real way to determine how much risk you have is to get the FEMA elevation certificate and file the Letter of Map Amendment. In almost every case where insurance is require by the lender, the cost of a FEMA Elevation Certificate and LOMA filing is far less than the ongoing cost of paying for flood insurance that you may not actually need. Even if it is determined that you do need insurance, you end up with an accurate assessment of your risk, and that can in many cases save hundreds of dollars each year.

Being informed about these types of things when buying a home can save you a lot of money over the life of the loan. Don't just take what you are given and accept it. In most cases, lenders and insurance companies are motivated to first protect their investments and assets before they consider yours. Take the time to investigate, and make a good informed decision. Apathy costs consumers a lot each year, and knowing what steps to take to protect yourself is the first step to saving money.

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