Over the past year and a half, Staten Island Legal Services, has been in the frontlines of helping homeowners cope with the aftermath of Superstorm Sandy. They have released the following guide to help homeowners decide how much flood insurance they should purchase. Thank you to Elan Ronen, Paralegal and Margaret Becker, Director of the Disaster Recovery Unit at Staten Island Legal Services for the information below.
How much flood insurance do I need?
We recommend that anyone at risk of flooding carry enough flood insurance to cover the cost of rebuilding the home if it is destroyed, up to the maximum policy amount of $250,000. Additional coverage for contents is recommended. Bear in mind that most contents in a basement will not be covered.
The following are minimum requirements. More than one of these requirements may apply to you, in which case you must meet the highest of the requirements:
Storm victims who received assistance from FEMA’s Individual Assistance Program (IA):
You must purchase coverage to at least the maximum FEMA grant. Currently that figure is $32,400 and it increases about $60-$70 a year. Recipients of FEMA aid who don’t purchase flood insurance and who apply for FEMA Assistance for a subsequent disaster will be ineligible across all categories of FEMA assistance. The FEMA flood insurance purchase requirement stays forever. The requirement sticks to the address even if the property is demolished and a new structure is built. Homeowners must inform future buyers of the requirement to maintain insurance.
People with a federally insured mortgage:
If you have a federally insured mortgage (e.g. Fannie, Freddie, FHA, or VA) and you live in a special flood hazard zone, you must maintain flood insurance up to the amount of the outstanding balance on the mortgage. The requirement ends once the balance is paid off. Mortgage servicers are penalized if they do not enforce this insurance requirement, which is why servicers “force place” flood insurance. In other words, if you do not purchase flood insurance, your mortgage servicer will purchase a policy for the property—usually at a much higher price–and pass the cost on to you in your monthly mortgage payment.
Recipients of Small Business Administration (SBA) loans:
You must purchase flood insurance up to the market value of the structure (not including the land) or the National Flood Insurance Program (NFIP) maximum of $250,000, depending on the size of the loan. Since the SBA loan is considered disaster assistance, you or the future purchaser of the property must maintain at least the FEMA aide maximum (currently $32,400), even after the SBA loan is paid off. As with mortgage servicers, SBA will force place insurance on your property, if you do not purchase a policy while your SBA loan is in repayment.
Recipients of Build It Back assistance:
Recipients will need to maintain flood insurance up to the Build It Back grant amount. Since the requirement comes from the use of federal funds (Community Development Block Grant), the requirement is permanent and attaches to the property, though the amount of insurance required on an ongoing basis has not been clarified. Sellers must disclose the requirement to subsequent purchasers. Failure to purchase flood insurance will make you ineligible for any future federal flood assistance (FEMA, SBA, CDBG).
1. To learn more about insurance and your home after a disaster, visit the section: Insurance, flood, and home section of LawHelpNY.
1. Need to talk to someone about a disaster-related issue? Call one of these free legal aid disaster hotlines.