What You Must Know About Insurance When Buying a Home

Purchasing a home involves getting to know a lot of financial terms and processes that most first-time homebuyers have never been exposed to. One of the most confusing is insurance. If you've never owned a home before, your familiarity with insurance most likely centers around auto insurance, health insurance, life insurance and, perhaps, renter's insurance.

Even then, your level of familiarity may be minimal, if you are like most Americans. In fact, a mere 14 percent of those who have health insurance understand even the most basic insurance jargon, such as deductibles, co-payments and co-insurance, according to a study published in the Journal of Health Economics.

The various types of insurance required in the average real estate transaction are even less understood, so let's take a look at them and get you up to speed.

Title Insurance

Title insurance comes in two varieties: a lender's policy and an owner's policy. If you take out a mortgage to purchase the home, your lender will require that you purchase a lender's policy. This protects the lender from anyone else who thinks he is the rightful owner or otherwise has a claim against the property.

Depending on where you live, you may also be required to purchase an owner's title insurance policy. In other areas, the purchase is voluntary.

The issuance of either policy is based on research of the property's title, or the "chain of title" as it is known. The examiner will look at public records, such as deeds, wills and trusts to ensure that the wording is proper and that the names on the documents are correct. She will look for outstanding mortgages, judgments and any liens against the property. She will check easements, look for pending legal action against the property and more.

Should the examiner find problems on the title, they will need to be remedied before the purchase can be completed.

Once the policy is in place, the lender (and you, if you purchase an owner's policy) is insured against unknown heirs coming forward claiming ownership, forged signatures on the deed, mistakes in the public records, and other hidden hazards.

Homeowners Insurance

You may hear homeowners insurance referred to as hazard insurance, but they are one and the same. Again, if you take out a mortgage to purchase the home, the lender will require that you purchase homeowners insurance.

While coverage varies, most policies cover fire damage or loss, theft, wind damage, hail damage, vandalism and more. Some perils aren't typically covered, such as flood and earthquake damage, but there may be supplemental insurance that you can purchase to cover these hazards.

Your insurance agent can help you determine how much coverage you require, based on the loan amount and what it might cost to rebuild the home.

Payments to the insurance company are either kept in an escrow account sent in with your mortgage payment or the homeowner pays the premium on her own – it varies by insurer.

If you suffer a loss, the insurance company will typically make out the check to both you and the lender.

Private Mortgage Insurance

Private mortgage insurance is something most homebuyers and homeowners would love to get rid of, but it's a necessary evil. Without it, many buyers would not be given a mortgage and thus not be able to purchase a home.

PMI is required of borrowers whose down payment is less than 20 percent. Because these borrowers are considered higher risk, the lender needs assurance that it will get its money should the borrower default on the loan.

Because the borrower pays the premium (typically added to the monthly mortgage payment), it seems that the lender is the only party that benefits. Keep in mind, however, that without PMI, lenders would demand a 20 percent down payment. Therefore, the cash-poor borrower reaps an enormous benefit.

The good news about PMI - at least for those with conventional loans - is that you can request a cancellation of the insurance once your loan balance reaches 80 percent of the original value of the home. Unfortunately, borrowers with an FHA-backed loan are locked into paying mortgage insurance premiums for the life of the loan, if they put less than 10 percent down. Borrowers who pay more than 10 percent, but less than 20 percent, can cancel the mortgage insurance in 11 years.

The best people to speak with if you have questions about any type of insurance required during the home-purchase process are your lawyer, your real estate agent and your insurance agent.

*** For all the real estate tools and the only Realtor you will ever need, visit TulsaHomeGuru.

Memories (and some jobs) Remain; Longtime Resident Hilti Leaving Tulsa

Hilti North America has been a part of Tulsa since 1979, during which employed many of my friends and family.  They established a name for being a great company to work for, with excellent benefits, competitive wages, employee support, and an admirable work environment.

How do I know? Certainly not because I've ever worked there, even though I tried. Back in 1998, I went through a rigorous recruiting process. Several recruiting and management staff spent an entire day with about a dozen fresh-out-of-college, bright-eyed hopefuls, including myself. As I recall, it was an experience and to this day, I've not forgotten the team building exercises, writing and sales agilities, and final sit-down analysis. I deeply respect and admire all those people that have broken through the gauntlet over the years. As for me, I never again considered going to work at Hilti, not really for the process I endured that day, although, it's certainly fathomable that my sub-conscious influenced me from returning. My career went in an entirely different direction, because now I have my own business in real estate that includes listing and selling residential properties.

Regardless, I've known good friends and clients who worked at Hilti over the years and they all give/gave nothing less than positive reviews. Generally, if you know someone who 'worked' at Hilti, chances are they actually still do. I believe Hilti employees are hard-working individuals who are committed to making their employer succeed. As a result, many Hilti employees have been such for a very long time, and if they haven't already been a Tulsa native, they most certainly feel like one now, which makes the decision to relocate its headquarters that much more disappointing. It pains me to see someone go through a forced job transition, as I know first hand about it. I was part of the telecom boom, and bust, back in 2000-2001. There's lots of things to consider being in that situation, as many Hilti employees are doing now. Thankfully, Hilti has stated they will keep 425 jobs in Tulsa while headquarters are being moved to Dallas. 

One of the reasons I started my business in real estate was to find the freedom to help my community. While I enjoy supporting various local charities and non-profits, I feel this is a great opportunity to help more. If you are, or know, someone being affected by Hilti North America moving their headquarters, please contact me today.

I have created a special offer to help them sell their home in Tulsa, and if they desire, another offer for helping them buy a home in the Dallas area. I will also provide free consultation and a comparative market analysis. My goal is always to provide my clients the most information possible so they can make the best decision. The savings can reach up to $2500, and either way it's certainly worth your time to see how I can help you. At the least, you can see what your home is worth and evaluate your options.

Contact me through my website or call me directly for more information at www.BrianPingleton.com

*** For all the real estate tools and the only Realtor you will ever need, visit TulsaHomeGuru.

3 Easy Improvements to Help You Sell Your Home

Forget, for a moment, about market trends and interest rates. At any given time, no matter the state of the economy, someone somewhere is selling their home. In any market, homeowners can up the odds that a home sells as quickly and as profitably as possible by giving it a facelift.

Sellers should focus on home improvement projects that either add value to the home or that attract buyers' eyes and pique their interests. Make them forget any other houses they viewed and want your house instead.

Don't randomly select home improvement projects based on your own tastes or suggestions from friends, either. You won't be the one living in the home, after all. Research houses in your community and compare features and appraisals to get a better idea what people in your area want. A swimming pool may be a popular upgrade in a Southern suburb filled with young couples and families, for instance. But in the North, a hot tub will have greater appeal. A community with older people, no matter where in the country, will probably value a car port or garage over a pool or spa.

Here are three home-improvement project categories that almost anyone can tackle without a large capital investment.

1.Boost Your Curb Appeal

You'll never get a second chance to make a first impression. When potential buyers drive up to your home, if they don't like what they see immediately, they may not get past the exterior to find the great things inside.

It's not about planting expensive trees, installing fountains or other fancy upgrades. In fact, some of the most value-added outdoor home-improvement projects cost little to nothing, except for your time. The National Association of Realtors® (NAR) suggests some of the following property improvements:

Get out your pruning shears: If your home is on the market, keeping the lawn mowed is a given. Keeping plants and flowers watered is also essential. Pruning trees, shrubs and other greenery is more easily overlooked, but it is one of those touches that will make your home stand out. Follow a pruning guide, like the one provided by Better Homes and Gardens, to get the most out of your efforts.

Dig into some mulch: Mulching is another often overlooked landscaping project with a tremendous impact. It helps conserve moisture, protects roots, discourages weeds, and other benefits. You can choose between all-natural mulches and decorative mulches, such as stone. You can even use compost that you create yourself or mown grass and fallen leaves.

Show off your green thumb: Purchase outdoor containers that complement your home's style and plant something unusual or interesting, NAR suggests. Place plants on the patio or around the home's entrance to immediately create a more appealing exterior. Plant bright flowers and foliage to provide a splash of color.

Clean up your home's exterior: Spend a weekend cleaning your gutters, windows and especially your siding, among other exterior items. Rent or purchase a power washer for a very affordable price to really make your home shine.

2. Add a Coat of Paint

Like a wash and wax for your car, a new coat of paint makes anything look better and brighter. To improve your home's value and attract buyers, consider a fresh paint job, inside and out.

The "safe" advice is to choose neutral colors, such as beige and off-white, and to avoid vibrant or gender-specific hues such as orange, purple or red. However, safe isn't always the best bet, arguesreal estate agent Todd Kroepel. "Keeping a home vanilla so that buyers can choose their own style and décor … ignores the fact that most buyers lack the ability to visualize the home differently," he cautions. Don't be afraid to add splashes of color and a touch of texture—it can be good to leave a dash of style evident.

Consider painting an accent wall in your living room with a contrasting color, or add some texturizing product instead. Adding hand-painted borders in the bathroom, by using stencils that run vertically or horizontally, is another classy touch.

Before painting, outside or in, ensure that the surface is clean and properly prepared. Use a primer to cover previously unfinished areas or bare wood, to better cover over dark or bold colors, or to block out stains. Inside your home, sand surfaces slightly if you don't use a primer, to help paint adhesion.

3. Update the Kitchen or Bathroom

Everyone appreciates a well-put-together and comfortable bathroom or kitchen. Renovations to these two rooms usually generate buyer interest and offer a high rate of return on investment when it comes time to sell.

Updates don't always require a large expenditure and a messy, lengthy remodeling period either. Some of the simplest things can change the entire feel of the room. Do as much, or as little, as you choose—just don't get too attached to the results.

Replace sink and bathtub fixtures: Switch out generic faucets and handles for newer, better-quality hardware. Think about using brass for a startling contrast, or select a style completely different from the current one.

Install a new sink: As long as you're replacing faucets and such, why not replace the bathroom or kitchen sink as well?

Refinish the cabinets: Solid wood responds well to sanding and refinishing with stain and a polyurethane top coat, or even paint. Newer cabinets often require refacing with veneer instead. Veneer kits make the job fairly simple: Adhere the material to the cabinet box (the portion left after removing doors and drawers) and then purchase new drawer fronts and cabinet doors to complete the makeover.

Upgrade your countertops: Replace laminate with stone, tile or even a concrete countertop. If you have old ceramic tile, clean or regrout to refresh the look.

Add lighting and accessories: Think in layers when it comes to lighting. Adding accent lights or task lights in any room of the house makes it more visually appealing. Other little touches include changing door knobs, light switch and outlet covers, or installing ceiling fans or a medicine cabinet. Consider swapping old light switches with dimmer switches or energy-saving, programmable lighting controls.

Highlight energy-savers: Speaking of saving energy, programmable thermostats, upgraded insulation and proper weatherproofing are music to many home buyers' ears.

While you can hire professionals to do the work for you, rolling up your sleeves and doing it yourself will increase the amount you recoup when you sell your home. Each project will increase the value of your property, no matter where you live, and help you sell your home faster.

*** For all the real estate tools and the only Realtor you will ever need, visit TulsaHomeGuru.

What to Look for When Buying an Older Home

Anyone who has visited San Francisco or Cape May, New Jersey knows how beautiful historic architecture can be. In San Francisco, they've even named their stately, restored Victorian homes "Painted Ladies."

But, are these older homes good buys? Considering that most of a home's components deteriorate with age, you may be not only buying a vintage home, but vintage problems as well.

Here's a quick look at some of the more common problems with older homes.

Foundation

It would seem that an old house has done all the settling it's going to do, right? Wrong, according to Page Engineering in Missouri. The rate at which the house settles diminishes over time, but it never completely stops – especially if the house has never been "piered."

Piers are long steel shafts that are driven through the soil and into the bedrock below. This process takes the weight of the home off unstable soil, and the home is less prone to settlement. It's a big job, though, and quite pricey.

Look for cracks in the walls, bulging floors and doors that won't close. These are all signs of possible foundation damage. Not all cracks, however, indicate a problem, so don't be alarmed – let a professional diagnose the situation.

The engineers with Page suggest taking a 4-foot bubble level with you when you visit an older home you're interested in purchasing. Use the level to check the floors and walls. If any of them are out of level, have the house checked by a structural engineer.

Electrical System

A home's electrical wiring system has a life expectancy of about 40 years, according to Mike McClintock, home repair writer with the Chicago Tribune. Safety risks increase when the system ages beyond this limit, he warns.

If the home was built between 1920 and 1950 and has never been remodeled, it may still haveknob-and-tube wiring, which is considered incapable of handling today's electrical loads.

Some home insurers won't cover a home with this type of wiring and will insist that it is replaced before insuring the home.

Your home inspector should be able to determine what type of wiring the home contains and its condition, at least in visible areas.

Plumbing

Old houses typically have old pipes. If the house you have your eye on was built before 1960, the pipes may be made of steel or cast-iron. These materials corrode, decay and rust over time. Cast iron pipes are notorious for becoming clogged with mineral build up.

Determining the type of pipes in the home is challenging because so much of the system is behind walls. A plumbing contractor inspection is your best bet, and even then you may not learn aboutall of the pipes in the house.

"Replacing old pipes in a 1,500-square foot, two-bathroom home costs $4,000 to $10,000, and requires cutting open walls and floors," claims Joe Bousquin at HouseLogic.

Roof

The last thing most homebuyers look at when they drive up to a home for sale is the roof. It's easy to be distracted by charming landscaping and attractive paint colors, but it's imperative that you take a good, long look at the home's roof.

Sagging is a sign that a roof is holding too much weight. This can happen when new roofing is installed over old roofing or from prolonged contact with a significant layer of snow.

If you know you'll be looking at older homes, take along a pair of binoculars. Before entering the home, look at the roof from the curb and determine whether the chimney and rooflines are straight.

Next, check the shingles. If they aren't flat and instead curled or cupped, they may need to be replaced.

Ask the homeowner the age of the roof. Although the lifespan of a roof depends on several factors, if it is wood, tile or asbestos and over 15 years old, you may need to replace it in a few years.

Since a new roof may cost upwards of $8,000, it's important to have the home's roof inspected before obligating yourself to purchase the home.

While it's highly doubtful that a home built in the mid-1800s still retains original components, you'll need to inquire as to the last time these elements were replaced.

Other problems you may find in an older home include:

Lack of storage

Lack of natural light

Inadequate insulation (thus higher heating and cooling costs)

Small kitchen

While all of these items can be rectified, the cost to do so should be factored into the price of the home.

That the craftsmanship and materials of an older home have stood the test of time is a testament to its quality. But few things last forever, and a home inspection, using the appropriate contractors, is a must when considering the purchase of an older home.

*** For all the real estate tools and the only Realtor you will ever need, visit TulsaHomeGuru.

Weekend DIY Projects to Improve Your Home Value

The best home improvements are those that have a high return on the investment. Remodeling Magazine publishes an annual Cost vs. Value Report, analyzing the ROI of 35 separate remodeling projects. You can even look at the return based on your region.

The report is based on the assumption that you're using professional labor to perform the remodel. You'll get an even higher return on your dollar, when it's time to sell your home, if you do the job yourself.

We've compiled our own list of DIY projects that buyers like, you'll enjoy in the meantime, and you can accomplish in a weekend. To keep it simple, we focused on two areas of the home that are key when it comes time to sell: the entryway and kitchen.

Upgrade Your Entry

As potential buyers walk up to your home, they can't help but notice the door. Upgrading to a new entry door is the perfect weekend DIY project. Even better, it's one of the projects listed on the Cost vs. Value Report, year after year, as a remodel that returns most of the investment upon the sale of a home.

According to the 2014 Cost vs. Value Report, a replacement steel door recoups 96.6 percent of the investment, while a new fiberglass door will offer an ROI of 70.8 percent. However, the report factors in labor to determine how much of the cost is recouped. When you install the door yourself, your return can only be higher.

Even if you've never done anything similar, hanging a door isn't beyond your capabilities. Expect to spend less than a day on this project.

Touch Up the Kitchen

Everyone seems to gravitate to the kitchen, and many buyers consider it the most important room in a home.

For the first time in a decade, a minor kitchen remodel increases home value by almost as much as the money spent to accomplish it, according to the "Minor Kitchen Remodel" analysis included in the Cost vs. Value Report. Keeping in mind that the figures include labor costs, the report claims an average ROI of 82.7 percent on the project.

Any single item on our list will make a noticeable difference in the feel and value of your kitchen.

Refinish your cabinetry. Modern veneer kits make resurfacing cabinet boxes fairly easy. Take off the doors and remove the drawers first. After installing the veneer, put new drawers in place. Add new knobs and pulls as well. The result: new-looking cabinets at a fraction of the cost.

Replace the countertops. Depending on the new counter surface selected, replacing a countertop is fairly simple and not likely to take more than a day or two.

Install new sink hardware. A mid-priced sink and new faucet freshen up the look of an older kitchen. Don't be afraid to try a different style or material.

Go shopping. New appliances can only increase your home value. Focus on ovens and cooktops that offer greater energy efficiency.

Focus on the flooring. As much traffic as the kitchen witnesses, the floor gets worn out easily. Consider installing new flooring to raise the value of your home.

When contemplating remodel projects, keep in mind that it's possible to over-improve a home, depending on the neighborhood and real estate market. Compare your home's features to those of nearby homes to get a better idea of what will prove valuable – or not – in your area.

*** For all the real estate tools and the only Realtor you will ever need, visit TulsaHomeGuru.

How to Lower Your Heating and Cooling Costs

When temperatures drop below freezing or rise to the point of sweltering, does it seem like your wallet develops leaks? If keeping your home comfortable year-round taxes your budget or tempts you to forgo comfort, you need to find a better way.

Try implementing simple methods to lower your heating and cooling bills.

Save on Air Conditioning

If you didn't have to heat or cool your home, you could easily cut your energy bills in half, as the Department of Energy points out. Few people want to return to the days before air conditioning and central heat, however. The problem, then, is balancing comfort with affordability. Try implementing these cooling strategies to save money while keeping cool.

Raise the AC temperature. Most experts suggest setting your thermostat to about 78 degrees when you're at home and around 85 degrees when you will be gone four hours or longer. For every degree higher you set the thermostat, you may save 1 to 3 percent on your energy bill.

Get a tune-up. As much as you may hate to spend the money, having your central air or window air conditioning unit serviced before the start of the cooling season will keep it operating efficiently and help ensure it doesn't break down at the worst moment possible.

Create wind chill. Moving air always makes you feel a little cooler. Purchase, install and run fans to help cool off even with the thermostat set higher. For ceiling fans, set the blades to spin counterclockwise, creating a cooling downward breeze. Turn off fans when you leave the room for more than a few minutes to conserve energy.

Take advantage of cool nights and mornings. If the temperature outside is lower than inside, turn off the AC, open the doors and windows, and allow the outside air to come in. Not only is fresh air healthy, but you can keep your house from heating up too early in the day.

Develop a green thumb. Trees and shrubs beautify your property and, when planted strategically, help shade your home. Shade means less need for summer cooling. Also, plant shade trees or shrubs around your AC unit so that it doesn't have to work as hard.

Block your windows. Save soaking up the sun for time spent outdoors. Inside, draw curtains to block out the sun. Look into window film to block sunlight and insulate the glass. Blinds, shades, shutters and other options exist as well.

Save on Heating

Don't let winter's frigid temperatures make your energy bills soar sky-high. Focus on a few strategies that keep the cold at bay while preventing the heat from leaking out of your home.

Lower your heating thermostat. When heating your home, keep your thermostat set at 68 degrees. At night and when you leave the house for four hours or longer, try setting it for between 55 and 60 degrees (if you have pets, you may want it closer to 60).

Have your furnace serviced. Even if it seems to work fine, having your furnace or heating system checked and serviced at the start of every heating season helps prevent unexpected breakdowns and ensures it operates efficiently.

Reverse your ceiling fans. Using ceiling fans isn't just for summer. In the winter, reverse the ceiling fan so the blades spin clockwise. This forces the warm air down as it sucks the cool air up toward the ceiling.

Install storm windows. Your windows are responsible for losing a tremendous amount of energy. New, energy-efficient windows are best if you can afford them. If you can't, install storm windows (and doors) in the winter to help prevent heat loss.

Get a snake. Don't like snakes? You'll like this one: Draft-stopping snakes fit along the bottom edge of a door to prevent drafts. Even a rolled-up towel will work.

Year-Round Heating and Cooling Efficiency

Change your filters. Changing HVAC filters is critical. Changing your filters will prevent dust and dirt from clogging the system and causing inefficiency.

Learn to use caulk and weatherstripping. Check for drafts around windows, doors, and places where wiring, plumbing and other items enter the home. Caulk and weatherstripping will stop much of the air leakage. Use expanding foam insulation where appropriate.

Seal your ductwork. Duct tape only goes so far. Hire a professional or seal your ducts with sealant and special tape to increase your energy efficiency.

Add some insulation. Unless your home was built recently, it may not have the insulation it requires. Insulation matters in both hot and cold weather. Add insulation, especially in the attic, to lower your heating and cooling bills. Calculate your insulation value by measuring the thickness and multiplying by the material's R-value. Compare to the Department of Energy's guidelines.

Get a new thermostat. A programmable thermostat can save you a significant amount of money by automatically adjusting the temperature according to your schedule.

Have an energy audit performed. A professional energy audit identifies where your home is losing heat. Many local energy companies offer free or low-cost audits to their customers.

Many people find it challenging to set their thermostat higher in the summer and cooler in the winter. Once your body adjusts, the new temperature won't be as difficult to maintain. Consider adjusting the setting by 2 degrees at a time over a period of weeks. Before you know it, you will be used to the new normal and enjoying every dollar you save.

*** For all the real estate tools and the only Realtor you will ever need, visit TulsaHomeGuru.

What Counts as a Comp for Your Home?

From replacing a rusted out bathroom sink to laying laminate flooring, Americans are hooked on the DIY craze. Some things, however, are better left to professionals. Establishing your home's current market value before putting it on the selling block or pursuing a refinance is one of those things.

To determine its value, appraisers and real estate agents will compare your home (the "subject property") to those that have recently sold in the area (known as "comps"). They will adjust the comps' prices up or down, according to how similar each home is to yours.

Read on to learn how a home qualifies as a comp for yours.

Status
The market value of a home is, simply, what a knowledgeable and willing buyer will pay it. This figure is reflected in the sales price of recently sold homes.

Appraisers and real estate agents use the local Multiple Listing Service (MLS) database in their research, to look for homes that have sold within the past six months. Only real estate licensees that pay an MLS membership fee will have access to this database, so a DIY consumer will find it challenging to locate a full and accurate list of sold properties.

Location
Since location is one of the principal indicators of property value, appraisers and real estate agents seek sold homes that are in close proximity to the subject property. Some lenders give strict location requirements to appraisers, for example a comp in an urban or suburban area must be no more than one mile away, and rural comps no more than five miles away.

Real estate agents, on the other hand, have a little more leeway and will typically begin their research close to the subject property and then widen the area until they've found three comparable properties that have sold in the past six months.

Neighborhood characteristics that influence a home's value include:
Nearby parks
Proximity to shopping
Neighborhood condition
Traffic, airport or other noise
The quality of the school district
Number of distressed properties in the neighborhood
Declining values or oversupply of homes in the area

Price Per Square Foot

You may see sold homes or homes for sale that list the price per square foot in addition to the price of the home. This figure takes into account only the home's square footage and nothing else. Because it fails to account for the diverse aspects and special features of the house, it isn't an accurate reflection of value.

That said, with all other aspects being equal, a larger home will most likely sell for more than a smaller home. 

Condition

Deferred maintenance will drag down the value of a home. Deferred maintenance includes all of the items you have been meaning to fix, but never got around to. Examples include:

Leaky faucets

Cracked windows

Loose or missing hand rails

Structural damage

Overgrown landscaping

Dirty or damaged carpets or other flooring

The Process
Since it is unlikely that your agent or an appraiser will find a home that's identical to yours, he or she will need to make adjustments to the sold prices of the comps to account for the differences.

If the comparable home is inferior to the subject property, value is added to bring it up to par. Conversely, if the comparable is superior to the subject, value is removed.

Here's an example of how this works:

The subject property has three bedrooms, two bathrooms and a pool. The comparable property, located three blocks from the subject, sold three weeks ago for $387,500.

The comparable property has three bedrooms and two and a half bathrooms, but it doesn't have a pool.

The appraiser or agent will deduct value from the comparable for the lack of a pool and add value for the extra half bathroom. The amount to deduct or add depends on the value the local market places on items such as a pool or a half bathroom.

The adjusted price range of the comp will reflect the current market value of the subject property.

Determining a home's market value isn't rocket science, but it does require current, accurate information and some experience with the process. A professional real estate agent will not only determine the current market value, but will also give you tips on how to get top dollar for the home.

*** For all the real estate tools and the only Realtor you will ever need, visit TulsaHomeGuru.

Flood Insurance Rates Going Up? Here’s What to Do

By: Dona DeZube
Published: July 22, 2013

If you live where floods happen, you may see an increase on your next flood insurance bill. Here’s why rates are changing, plus tips to help you figure out if you’re affected.

(On March 21, 2014, President Obama signed into law a bill to provide relief from high flood insurance rates. Read about it here.)

Why Are Rates Going Up?

Two reasons:

1. The Federal Emergency Management Agency is updating its flood maps to be more accurate, which could change your flood risk designation. If your risk is higher, your premiums will go up. If it’s lower, your premiums could go down.

2. Last year, a new law took effect that requires the National Flood Insurance Program (NFIP) to phase out subsidies for some older properties to reflect the full risk of flooding.

Phasing out the subsidized rates and discounts over the next five years will help the NFIP stay solvent.

Some subsidies have been given in the form of “grandfathering.” A grandfathered rate is a discount given to homes built in compliance with then-existing standards in a flood-mapped community where the flood risk has since increased.

Congress and FEMA are reviewing these properties to determine whether to phase out these grandfathered rates. FEMA won’t make a decision on this until late 2014. By then, Congress could pass a law delaying the increase indefinitely.

Do You Have a Subsidized or Discounted Rate?

Only 20% of NFIP policies are subsidized. Most hom eowners already pay the full rate and won’t see an increase.

If your property isn’t your principal residence, is in a special flood hazard area, and was built before the first flood insurance rate map was implemented for your community, you may be getting a subsidy for being what’s called Pre-FIRM (pre-flood-insurance-rate-map).

TIP: To find out if your home is Pre-FIRM, look up your area in the Federal Emergency Management Agency’s (FEMA’s) Community Book.

1. Click your state.

2. Look for the date in the “Init FIRM Identified” column for your area.

If your home was built before that date and it’s in a special hazard zone, you probably have subsidized flood insurance.

If Your Premiums Aren’t Subsidized or Discounted

It’s possible you still could see a change in your flood insurance premiums if your home is in a community that adopts a revised flood map after July 6, 2012. If that revised flood map puts you in a different zone, your rates could go up or down.

When Will the Rate Changes Take Effect?

If your home is Pre-FIRM and it’s a second home (rental or vacation), you may already have seen your rates change. A 25% increase was implemented for policies renewing after Jan. 1, 2013. Increases will continue each year until they reach full-risk rates.

In October 2013, more subsidized homes will start seeing rate increases of 25% each year:

Severe repetitive loss properties


Business properties


Properties with previous flood claims for more than the market value of the property
If you have a Pre-FIRM home, and it’s your primary home, and it doesn’t fall into the above-mentioned categories, (lucky you!) you get to keep your subsidized rate until:

You sell your home.


You let your policy lapse.


You have severe, repeated flood losses.


You buy a new policy.
Can You Get a Better Rate?

You may be able to get a lower flood insurance rate by changing your home’s flood risk. Congress appropriated a large sum of money for property owners to raise their homes onto piers, posts, columns, or pilings. Check with your local community to see if grant money is available to help you do that. Talk to your insurance agent about how elevating your house will change your flood insurance premium.

There’s also a Community Rating System that could reduce flood insurance rates by up to 45%, depending on which flood plain management regulations your community adopts.

Check with your local officials or insurance company to see if your community participates and if you can get a discount for that. If your community doesn’t participate, write a letter to local officials urging them to join the Community Rating System.

Other things you can do to trim your flood insurance premiums:

Opt for a higher deductible on your excess insurance policy if you have one.


Convince local officials to put more money into community flood mitigation projects to lower your flood risk.
It won’t lower your premium, but having a flood cleanup kit on hand will make your life easier if you do have a flood.

By the way, NFIP is the best deal. Without it, you have to take your chances in a virtually nonexistent private market for flood insurance at rates only the wealthy can afford.

Some of the same companies that provide private flood coverage also sell “excess coverage” flood insurance. Excess coverage pays to rebuild homes valued at more than the NFIP limit of $250,000.

Mistakes in Flood Insurance Premiums

It’s possible the rate you’re quoted for flood insurance is wrong. If you disagree about whether your home is in a particular flood zone or the insurer didn’t take into account the pilings that raise your home 12 feet in the air, you can appeal your home’s flood zone determination.

An elevation certificate from a surveyor or engineer can lower your premium if it proves your home sits above the predicted flood level.

You’ll also want to correct insurer mistakes that lower your premium. For example, if your policy says your home doesn’t have an elevator or crawlspace and it does, tell your agent, even if your premium will rise when those are included. That ensures your property and possessions are fully covered and recoup what you’re owed.

Think the FEMA map itself is wrong? Check with local zoning officials, your builder, prior owners, a local surveyor, and FEMA to see if anyone has filed a Letter of Map Amendment asking for a map review.

If no one has filed, you can do your own appeal.

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Visit HouseLogic.com for more articles like this. Reprinted from HouseLogic.com with permission of the NATIONAL ASSOCIATION OF REALTORS®.

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