We are in the preparing to elevate our house after Sandy. We have been told that insurance premiums can increase by 25% per year (limited by law to prevent huge increases) with no cap if we don’t lift. We have tried to find out from our insurance company how high the premium could potentially go but they can’t (or won’t) tell us. My question is this - why not? Shouldn’t they have figured that out by now? They know our elevation and base flood level and the value of our house. What more do they need to determine risk/premiums?
Have you talked to any other insurance companies? I would ask them for a quote and read the fine print on this particular issue.
I don’t think what you are asking for is unreasonable. I’m guessing they just don’t want to go through the hassle of figuring it out for one person.
Have you not hunted around the National Flood Insurance Program web-site?
They need to know the frequency & severity of hurricanes & storm surges in the future and they need to know what other new laws Congress & Albany will pass to interfere with their ability to charge what they want. Those are hard questions to answer.
Imagine your area gets 2 Sandy-equivalents every year for the next 20 years. Do you think a mere 20 x 25% = 5x increase in your current premiums will make it profitable for them to have paid to rebuild coastal NYC 40 times? Not even remotely.
There is not a lot of good information on how fast climate change will alter the volume & severity of storms. There certainly are predictions, but the standard deviation of the range of predictions is huge.
As a practical matter, given the losses the industry has taken recently, it’s a good bet you can count on 25% increases every year for at least a few years to catch up to the reality of what you (and I) ought to have been paying for the last 20 years.
Doing absolutely 100% of what you can to reduce your exposure is smart planning. I just bought $20K of hurricane proofing & will recoup the investment in 4 years. The impact on my storm insurance premiums is that dramatic
I’ll take 25% ROI for $20K Alex. That’s a Jeopardy question that’s easy to answer.
It’s not their job, unless you’re trying to renew for the next five years in advance. Contact your state insurance commissioner’s office. They will tell you what the annual permissible increase is (or whatever method is used to cap increases).
If you are getting flood insurance then you are being subsidized by the rest of us tax-payers to maintain your home in a flood prone area. How about kicking a few bucks my way to pay for my homeowners’s insurance. Otherwise stop complaining.
Moderator Note
Omar Little, political jabs are not allowed in GQ. This does not contribute to answering the OP. No warning issued, but don’t do this again.
Colibri
General Questions Moderator
How much will you be making in 2020? How about 2030?
How much will it cost to buy a new car in 2021?
But you think the insurance company can tell you, with absolute certainty, what the premium (which is subject to legislative dictum) will be?
^This, 1000 times this^. One really can’t even look at historical premium increases as a predictive guide, because the governmnet(s) have kept premiums artificailly low. For at least the next few years, it’s probably safe to assume maximum or near maximum rate increases as the NFIP and insurance companies try to balance their risks.
Look particularly at figure 8 on page 13 of this report (warning: PDF) from the Union of Concerned Scientists. It shows how you could easily save in excess of $90,000 in flood premiums over 10 years by raising your home to 3 feet above base flood elevation. You don’t mention what estimated cost of raising your house, but that is a huge chunk of change.
The annual premium increase cap is 20%, by the way (also referenced in figure 8).
I don’t expect the actuaries to be able to give me an exact figure but I do think they must have some idea, even if its just based on what they know today. Two Sandys a year as an example is a little extreme. It was considered a 100 year storm. Just prior to Sandy we were paying around $1500. Now its $2000 but we are told that the big increases haven’t hit yet. Assuming an 18% per year increase for the next ten years our premium will be over $10,000 and even that might not reflect the actual risk. I get it. The rest of the country shouldn’t be subsidizing us. I don’t disagree and I am not “complaining”.
The state estimates the cost to raise our house to be $247,000 to one foot above flood level. That figure is based on 1983 maps. Interestingly, the preliminary new maps actually lower the 100 year level by two feet. We are eligible for $195,000 in grant money (how’s THAT for subsidizing?). If the state’s figure is accurate we may need to come up with another $50K or pay the increased premiums as they come. Neither is very attractive but it is pretty much a no-brainer. My point is that I find it hard to believe that the insurance companies don’t already have a rough estimate of what actual-risk premiums will ultimately be. That figure would certainly help people who are in a raise, don’t raise or sell dilemma.
They very well may have a rough idea of what increase will be necessary. But they don’t want to get sued by people who are too stupid to understand the difference between an estimate and a firm price.