House passes major Flood Insurance legislation: most coastal flood rates to increase, broader coverage options coming!

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On July 12, 2011 the House of Representatives passed a bill (HR 1309) that will fundamentally change the National Flood Insurance Program, the public’s main outlet for flood insurance.  The bill passed by an overwhelmingly bipartisan vote of 402 to 22.  An amendment to close the whole program was roundly defeated.  Senate passage is expected, though when is uncertain.

The existing program was in trouble.  Congress missed four reauthorization deadlines last year, meaning the program lapsed four times for several days at a time, creating havoc in the real estate and insurance markets.  In addition, a lingering debt of $18 billion remains on the books from 2005 (mostly Hurricane Katrina); a hurricane in any metropolitan area in Florida or the Gulf could double that loss in a weekend.  The 112th Congress is less inclined to accept these kinds of unpredictable expenses, and the bill seems to reflect this change in attitude.

The National Flood insurance program has been around for decades and today is the primary vehicle for providing insurance for about 5.5 million property owners around the country.  Locally, many homes from Quincy to Plymouth and hundreds more on the Cape have been rebuilt with NFIP insurance.

Conceptually the National Flood Insurance Program makes sense: private insurers are reluctant to insure against losses that are geographically concentrated because of an insurance concept known as ‘spread of risk’.  A single company can’t accept such concentrated risk without putting its own balance sheet on the line.  The national government can spread risk better: they collect premiums for spring river overflows in the Midwest, winter nor’easters in New England, and fall hurricanes in the Gulf.  The problem is that the current rates are not developed with the same detail as private insurers need when trying to make a profit.  To wit, in 2006, the year after over $17 billion in losses, NFIP rates actually went down.  This pricing failure leads to a problem known as ‘adverse selection’: flood insurance is a great deal if you’re really near the water; it’s not a great deal if you’re only mildly exposed to flood waters.  Thus, the people at the greatest risk get the best (most subsidized) deal.  This is not a formula for long term survival, or even a break-even program.  Consider the findings of a 2006 Congressional Research Service study: the program operated at a loss for 19 of the previous 34 years.  This spring’s midwestern floods likely contributed to pressure for overhaul.  In its existing form, it is truly another disaster waiting to happen.

The program has also been criticized for promoting development in environmentally sensitive coastal areas.  While coastal development was seen as a positive thing 40-50 years ago, today many voters prefer to see remaining undeveloped coastal land and wetlands set aside for conservation.

In the bill passed by the House, rates will be transitioned gradually to risk based premiums.  Many properties with multiple claims will see lower subsidies, and in some cases, insurance may be refused altogether.  During the transition phase, annual premium increases, previously limited to 10% per year, will be capped at 20% per year.  Other features include minimum $2,000 deductibles on subsidized rate properties, and $1,000 deductibles on risk rated properties.  The bill also established a ‘Technical Mapping Advisory Council’ to develop new mapping standards.  In short, the NFIP is transitioning in a direction toward the way for-profit companies measure and charge for risk.

Because of the transition to risk based pricing, some new options will become available: annual increases indexed to inflation, and additional living expenses common with homeowners insurance.  Business income loss will be offered for business properties.  Importantly, the bill reauthorizes the program through 2016, which will provide a measure of certainty severely lacking in previous years.

The bill’s author, U.S. Representative Judy Biggert, R-Ill., said after the vote, this “eliminates barriers to the development of a private flood insurance market, and helps take taxpayers out of the risk business. The NFIP is too important to let lapse, and too in debt to continue without reform. I urge my colleagues in the Senate to speed this legislation to the President’s desk.”  Locally, Congressman Bill Keating of the 10^th Congressional district and Stephen Lynch of the 9^th, both voted for the bill.  More detailed summaries of the bill are available at thomas.gov site linked here.

For most homeowners along the coast, this will mean higher flood insurance costs beginning this fall.  There are still steps homeowners can take to reduce costs, and to control what kind of insurance you need to buy. Those steps include:

• Know what zone you are in; if you buy insurance before your local flood map changes, you should be grandfathered to the existing zone. View FEMA’s map pages here
• If you are in a n A, B, or X zone, getting an Elevation Certificate from a qualified engineer may help you especially if you are on or near the border of a lower rated zone (Your home might be in a better place than the map says).
• For more about coastal insurance for your home, visit www.agordon.com/home.
  Consider mitigation practices such as those recommended by FEMA and other construction experts.

The bill had broad support from insurance companies and agency groups for improving the predictability and sustainability of the program’s future.   For more about what you can do to contain the cost of insuring property along the coast, visit www.agordon.com/home for more.

Geoff Gordon

Related articles

• House acts to overhaul flood insurance program (seattletimes.nwsource.com)

The MA Homestead Act Changes: Home Sweet Homestead

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We’ve noticed an uptick in phone calls to our insurance agency,  inquiring about the recent changes to the Massachusetts Homestead Act.  Customers are wondering if they need to make any changes if they already have a Declaration of Homestead filed for their primary residence. New home buyers  or customers refinancing their mortgages are questioning if they need to file documents to obtain any protection. 
Massachusetts and many other states put Homestead laws in place to protect homeowners from losing their primary residences if they have no other assets available to pay their debts.  Under the previous Homestead law, homeowners and their families could protect up to $500,000 of home equity from many types of creditors if they filed a simple Declaration of Homestead at their Registry of Deeds.  Under both the old and new law, if a homeowner records the Declaration of Homestead  before a creditor files a lien against his property, the creditor cannot recover the debt by forcing the homeowner or his family to sell their home as long as the amount of the debt or debts are under $500,000. The Homestead Act does not protect homeowners from debts owed for mortgages, child support and condo association fees.

Here is a summary of the Massachusetts Homestead Law effective March, 2011. The changes were made to reduce ambiguities under the previous Homestead law: 

• All Massachusetts homeowners receive an automatic homestead exemption of $125,000 for protection against certain creditor claims on their principal residence without having to do anything.
• All Mass. residents are eligible for a $500,000 “declared homestead exemption” by filing a declaration of homestead at the Registry of Deeds. For married couples, both spouses will now have to sign the form–which is a change from prior practice.
• If you already have a homestead recorded at the Registry of Deeds, you do not have to re-file it. You are all set, and have the full $500,000 protection.
• Homesteads are now available on 2-4 family homes, and for homes in trust. This is also new.
• The existing “elderly and disabled” homestead will remain available at $500,000.
• If you have a homestead as a single person, and get married, the homestead automatically protects your new spouse. Homesteads now pass on to the surviving spouse and children who live in the home.
• You do not have to re-file a homestead after a refinance. There’s always been confusion here, with lenders requiring homeowners to either subordinate or release homesteads. Under the new law, homesteads are automatically subordinate to mortgages, and lenders are specifically prohibited from having borrowers waive or release a homestead.
• Closing attorneys in mortgage transactions must now provide borrowers with a notice of availability of a homestead.
• The cost of filing the Declaration of Homestead is $35 and it must be notarized. Need a notary? Our insurance agency offers free notary services. You can file the document at the Registry of Deeds or  an attorney can file the declaration for you.  

 Hope you find this information helpful. It is not designed to provide any legal advice-as in all areas of the law, to fully understand your rights, you should consult an attorney of your choice.

For more information, here’s an excellent question and answer document.

Kasey McCarthy
CPCU, Andrew G. Gordon, Inc.

Insurance in the Courtroom: Are You Covered?

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Many people feel that we now live in a litiginous society.  We hear about lawsuits being filed for injuries resulting from seemingly minor auto accidents or slip and fall injuries at residences.  With this trend in filing lawsuits, we strongly recommend that our insureds consider purchasing an excess liability, or umbrella, policy to protect their assets.  These would include any homes or properties owned, vehicles, boats, retirement income, etc.  Coverage can be purchased starting at $1M in coverage for a relatively low premium and can often be endorsed onto the existing homeowner policy.

One might think that only well-established people would need this coverage but we have learned that even the young who may not yet own any property or have older vehicles of insignificant value should also consider this coverage.  In the event of an at fault auto accident which may have caused injuries to others, a law suit may be filed against the young operator with no assets and a judgment may be assessed to garnish future wages for many years.  A $1M umbrella would certainly help in such a situation as not only would the settlement amount be paid for under the umbrella but also the defense costs are built into this coverage.

It is extremely important that one protects the assets that could be made available to someone who has been successful in obtaining a judgment against you.

Another factor to consider in protecting yourself is not only to purchase this excess liability coverage but also to try to eliminate the potential risks for injury.  When driving an auto, avoid alcohol, cell phone usage, and other distractions while observing the rules of the road and maintaining safe speed limits.  At residences, paths should be kept clear of ice and snow in the winter and smoke & carbon monoxide detectors  should be maintained in proper working order.  Power tools, weapons, and alcohol should be kept under lock and key and toys and gardening tools should not be left where visitors could trip or fall.  If there is a swimming pool or pets, verify that you are complying with town ordinance requirements for the pool’s fencing and gates as well as pet restraints. 

It is not our intent to alarm anyone but rather to educate people by making them aware of their ability to keep themselves and their assets protected.

For additional information on other insurance coverages or to read some of our other informative blogs, please visit our website at www.agordon.com.

Donna Bellavance
Andrew G. Gordon, Inc.

Property Damage: Don’t let an old house become a mold house

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Now that we are halfway through the winter season and  heading into a potentially “wet” spring, it is important that we be on the lookout for mold in our homes.  Homeowner policies generally provide limited coverage for mold/fungi damage following a covered loss (usually $10,000 for property damage claims and $50,000 for liability claims).

Experts claim that the best way to control mold growth is to control the amount of moisture within the home.  If there has been some type of water damage to the residence, whether a result of ice dams, burst pipe, or sump pump failure, it is important that the repairs are done in a timely fashion, all excess water is eliminated, and any mold is immediately removed.

Not only can mold pose a problem for your home and contents , it may also be detrimental to your health.  Residents have suffered allergic reactions, respiratory illnesses, and asthma as a result of the presence of mold in their homes.

Since mold can grow almost anywhere and practically on anything where moisture and oxygen are present, it is recommended that you eliminate condensation by various methods, such as venting showers, clothes dryers, and cooking areas to the outside.  Humidifiers should not be constantly running as this keeps moisture in the air.  Proper insulation and ventilation should be maintained within the home during all four seasons.

Additional information on this subject can be obtained by visiting: www.epa.gov/mold/moldguide.html.

For more interesting tidbits regarding insurance or other topical subject matter, please visit our website at: www.agordon.com.

Donna  B.
A. G. Gordon, Inc.
Insurance & Risk Management+

Related Articles

• Prevent additional damage following a fire restoration of water and the possibility of mould damage (nationaldamagerestoration.com)
• Mold Removal Cost – What You Can Expect To Pay (nationaldamagerestoration.com)

Ice Dams – what to do

Many homeowners may have ice dams forming on their roofs after all the snow we’ve had this winter. Once an ice dam forms, it is difficult to fix. The safest course is to hire a professional because of the dangers of falling snow and icicles, unsecured ladders, and possible damage to shingles and gutters.

If you choose to do the work yourself, take extreme care and follow these recommendations from contracting experts:
1. Use a roof rake to remove snow buildup from the roof.

a. AVOID USING A ROOF RAKE NEAR ANY ELECTRICAL WIRING!
b. DO NOT climb on a roof or work on a ladder beneath a roof that has lots of snow on it
c. Be especially careful on ladders; be sure the base is well secured.
2. Remove ice buildup around gutters by melting the ice with calcium chloride (other products such as rock salt will damage the roof shingles). For added effectiveness, put the melting agent inside a sock or nylon stocking, and lay perpendicular to the gutters or roof line. This creates a channel in the ice dam, releasing the melting agent slowly and allowing the water to drip to the ground through.
3. After applying a melting agent, if you must chip the ice, do so very carefully. NEVER strike your roof with an axe, hammer, or anything that will damage the shingles.

Warning signs: Aside from leaks, stains, and damaged ceilings or walls, there are several signs that ice dams are beginning to cause interior damage.
• Large icicles hanging from the gutters during cold-snaps following snow storms.
• A thick blanket of snow down slope of bare shingles points toward trouble.
• Water dripping from the roof over a layer of ice is a hint that a dam has formed.
Visit our website at www.agordon.com for a list of local contractors who are trained at removing ice dams safely and effectively. The cost to have ice dams removed from your home is usually less than your deductible!
For other tips on keeping the cost of your homeowner’s insurance low, visit www.agordon.com/home, or view our library of whiteboard presentations at www.agordon.com/whiteboards.

Pig A la Mode

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We tend to think of the more common types of Homeowners claims such as fire, theft, wind damage etc. My dad always called his Homeowners policy his “Fire policy”.  “If it’s not a fire, I’m not putting in a claim”. Times have changed since then and homeowners look to their policy to help them share the burden of loss.

As an agent, one of my most memorable claims involved a pet pig. Hilarious but true! My clients were awakened by lightning damage at their home.  It seems that a lightning bolt hit the side of their car, knocking off both hub caps. According to the fire department, the lightning bolt then traveled underneath the paved driveway and knocked off the hub caps on the other side of the car. The bolt then proceeded to travel over to the gate of the Smith’s metal fence, hitting the electric lock and causing the gate to open. Fenced inside was the Smith’s pet pig. The pig became spooked and ran across the street and in the neighbor’s back yard.  The pig then ran across the covered in ground pool and fell through the cover. The fire department successfully rescued the pig from drowning.

• Replacement of the damaged electric lock, replacement for the neighbor’s pool cover, and the fire department service charge were covered on the Homeowners policy.
• Replacement of damaged hub caps were covered on the auto policy.
• Rescued & consoled pig…………………..Priceless!

Bill C.
A. G. Gordon, Inc.

Sometimes, it’s good to sit back and laugh at insurance, which is usually a serious matter. Check out our website for more insurance information and resources.

Burglary and Crime Prevention Tip

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  Put your car keys beside your bed at night
 
 
 Tell your spouse, your children, your neighbors, your parents, your Dr’s
 office, the check-out girl at the market, and everyone you run across. Put your
 car keys beside your bed at night. If you hear a noise outside your home or
 someone trying to get in your house, just press the panic button for your
 car. The alarm will be set off, and the horn will continue to sound until
 either you turn it off or the car battery dies. This tip came from a
 neighborhood watch Coordinator. Next time you come home for the night and
 you start to put your keys away, Think of this: It’s a security alarm system
 that you probably already have and requires no installation. Test it. It
 will go off from most everywhere inside your house and will keep honking
 until your battery runs down or until you reset it with the button on the
 key fob chain. It works if you park in your driveway or garage.. If your car
 alarm goes off when someone is trying to break into your house, odds are the
 burglar/rapist won’t stick around..
 After a few seconds all the neighbors will be looking out their windows to
 see who’s out there and the criminal won’t want that. And
 remember to carry your keys while walking to your car in a parking lot. The
 alarm can work the same way there. This is something that should really be
 shared with everyone; it could save a life or prevent a sexual abuse crime.

For more relevant insurance information and practical tips, visit the A. G. Gordon, Inc. website.

Carbon Monoxide: Gaseous Ninja

Carbon Monoxide (CO) is one of the most lethal gases to encounter.  It’s particularly dangerous because it’s everywhere, and extremely hard to detect. This “silent killer” is both odorless and colorless, and in high levels can kill in less than 5 minutes. It bonds with hemoglobin in the blood to form carboxyglobin, which prevents oxygen from reaching the brain. CO is produced whenever any fuel such as gas, oil, kerosene, wood, or charcoal is burned. If appliances that burn fuel are maintained and used properly, the amount of CO produced is usually not hazardous. However, if appliances are not working properly or are used incorrectly, dangerous levels of CO can result. Hundreds of people die accidentally every year from CO poisoning caused by malfunctioning or improperly used fuel-burning appliances. Even more die from CO produced by idling cars. Fetuses, infants, elderly people, and people with anemia or with a history of heart or respiratory disease can be especially susceptible. Be safe.

Preventionis the Key to Avoiding Carbon Monoxide Poisoning

	DO have your fuel-burning appliances — including oil and gas furnaces, gas water heaters, gas ranges and ovens, gas dryers, gas or kerosene space heaters, fireplaces, and wood stoves — inspected by a trained professional at the beginning of every heating season. Make certain that the flues and chimneys are connected, in good condition, and not blocked.
	DO choose appliances that vent their fumes to the outside whenever possible, have them properly installed, and maintain them according to manufacturers’ instructions.
	DO read and follow all of the instructions that accompany any fuel-burning device. If you cannot avoid using an unvented gas or kerosene space heater, carefully follow the cautions that come with the device. Use the proper fuel and keep doors to the rest of the house open. Crack a window to ensure enough air for ventilation and proper fuel-burning.
	Note: Propane is also colorless and odorless, which is why propane companies add a sulfur compound to the formula to make the gas smell bad.

 

	DON’T idle the car in a garage — even if the garage door to the outside is open. Fumes can build up very quickly in the garage and living area of your home.
	DON’T use a gas oven to heat your home, even for a short time.
	DON’T ever use a charcoal grill indoors — even in a fireplace.
	DON’T sleep in any room with an unvented gas or kerosene space heater.
	DON’T use any gasoline-powered engines (mowers, weed trimmers, snow blowers, chain saws, small engines or generators) in enclosed spaces.
	DON’T ignore symptoms, particularly if more than one person is feeling them. You could lose consciousness and die if you do nothing.*List courtesy of www.epa.gov *

 

A Few Words About CO Detectors: 

Carbon Monoxide Detectors are widely available in stores and you may want to consider buying one as a back-up — BUT NOT AS A REPLACEMENT for proper use and maintenance of your fuel-burning appliances. However, it is important for you to know that the technology of CO detectors is still developing, that there are several types on the market, and that they are not generally considered to be as reliable as the smoke detectors found in homes today. Some CO detectors have been laboratory-tested, and their performance varied. Some performed well, others failed to alarm even at very high CO levels, and still others alarmed even at very low levels that don’t pose any immediate health risk. And unlike a smoke detector, where you can easily confirm the cause of the alarm, CO is invisible and odorless, so it’s harder to tell if an alarm is false or a real emergency.

Related Articles

• Carbon Monoxide Poisoning Protection Tips (homesecuritysource.com)
• Carbon Monoxide Hazards and Your Home (homeownersinsurance.org)
• Carbon monoxide poisoning – All Information (umm.edu)

For more insurance information, as well as topical and relevant resources, visit our website, www.agordon.com.

Protect Your Engine from Ethanol Damage

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 During a recent trip to the “fix it” shop I learned of the probable reason that my lawn mower – as well as my lawn tractor and snow blower— wasn’t properly working.  Although I flirted with the possibility that a poltergeist was haunting all my gas-powered tools, it turns out that changes in fuel composition are to blame. The transition from pure gasoline to a mix of gasoline and ethanol were the culprits that had brought about the unforeseen damage to the engines.  

Ethanol attracts moisture, which rapidly deteriorates fuel.    My “fix it” shop offered the following solution: run the lawn mower/snow blower/etc until it’s almost out of gas or drain the fuel when not in use.  I consulted some articles on the subject that suggested the problems to be more extensive, but I’m going to employ the simple solution above to do the trick.

Maintaining expensive tools even with the simplest of procedures will save you trouble and money in the future.  Insurance doesn’t and shouldn’t cover everything, including a small engine with moisture damage, so I hope this tip acts as your insurance against this problem!

And for a wealth of insurance information and topical resources, visit the A. G. Gordon, Inc. Website.

What is a Puffback?

Most of us have never heard of a puff back. A puff back occurs when an oil burner backfires, sending soot throughout your home or business. It can happen all at once (like a balloon popping) or more gradually (as if someone was holding the end of a balloon and letting the air seep out slowly). It is usually easy to tell when a puff back has occurred. Soot covers all areas of the home or business and may range from light to very heavy. Sometimes the disbursement of soot is so light and fine it appears to be ordinary dust. This “dust” however reappears hours after being cleaned. There is often a strong odor of oil accompanying a puff back.

If you try to wash the film of soot off of your furniture & walls with ordinary soap & water, it actually smears the soot around without removing it, leaving you (and your walls) rubbed the wrong way. Home restoration companies have to use special chemicals to remove the soot; a washcloth and some warm water is not going to be effective. But as they say, an ounce of prevention is worth a pound of soot not on your walls: having your oil furnace checked and cleaned annually be a service technician will prevent even the grimiest furnaces from spewing into your home.  Best done before winter!  Gas furnaces burn cleaner and do not pose this type of peril.

And for more insurance information, as well as topical and relevant insurance resources, visit the A G Gordon Website.