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.

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)

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.

Water, Water, Everywhere.

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Homeowner claims resulting from water damage are on the rise (no pun intended). Bob Passmore of the Property Casualty Insurance Association of America reports that “out of every $100 paid in insurance claims, $12 goes to water damage and freezing claims, not including water damage from flooding rivers and seas.   Flooding from ground water is not covered unless you have a flood insurance policy.  

Water damage, other than floods, is covered if the cause is sudden and accidental. A loose drain pipe from the bathtub that slowly leaks for months and buckles the bathroom floor is not covered.  However, the damage caused by a pipe that suddenly bursts is covered. The plumber’s repair to replace the pipe is not covered but the resulting damage is.  

There are measures you can take to prevent and lessen the amount ofwater damage and their resulting claims. Here are some that come to mind:  

• Ice dams are caused by the melting ice in your gutter that backs up under your roof shingles, causing water damage to your ceilings, windows and walls. Use an ice dam rake on your roof when snow accumulates.
• Have a licensed plumber periodically check your plumbing pipes.
• Replace your washing machine and dishwasher hoses with ‘no-burst’ hoses. Unlike rubber hoses that can burst over time, these are made of a metal sheath that protects against bursting.
• Periodically check around and under your hot water heater for any signs of leakage – a small drip from the tank can turn into a ruptured tank in no time at all!
• Never run your dishwasher or washing machine when not at home (easier said than done, I know).
• Check your toilets and under your sinks for any signs of water leakage.
• At the first sign of freezing weather, turn off your outside water spigots (from the inside of the house) then drain from the outside. Newer spigots are designed to prevent freezing do not have to be shut off from the inside during the winter months. These can be replaced by a licensed plumber.
• Check your ice-maker and its water line for any signs of leakage.
• When on vacation, especially in the winter, have someone check your home daily.
• Water alarm sensors are available to detect the presence of water in your basement
• A temperature monitoring device plugs into your phone outlet and can alert you via cell phone that the temperature has dropped to the danger point of freezing. Use such a device when vacationing in the winter.
• Newer gas furnaces operate with an electronic pilot. Older models have a gas flame pilot that can blow out from a draft. No heat means freezing pipes! Before going away on vacation, familiarize which type of pilot you have. If the former, this is another good reason to have someone check your home daily or have a temperature monitoring device!

Please watch for our future blog, “How to minimize further damage if you sustain water damage to your home “.  

And for more relevant insurance information, and resources to save you time and money, visit the A. G. Gordon, Inc. Website.  

Related Articles

• Emergency Water Damage Cleanup and Repair (homerenorepair.suite101.com)
• Burst pipe floods parking lot (tech.mit.edu)

Linseed Oil is Hot Stuff

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Ever wonder about horror movie special effects where an object suddenly bursts into flames without any likely cause? Look around the movie set and there is no electrical short, match, flame or spark to set the object ablaze.  You may have witnessed a phenomenon called  spontaneous combustion.   

One of our insurance agency customers learned about this phenomenon firsthand  after cleaning her antique pumpkin pine floors with linseed oil. She placed the rags in her washing machine. The insured walked away for only a few minutes before turning on the machine when suddenly the rags combusted and began melting the inside drum of the washer. The fire department responded within minutes and the homeowner only incurred very minor smoke damage to her million dollar home.  

There was a very happy ending to this story but it brings an awareness to the dangers of linseed oil and other oils used to finish wood. Heat  is generated during the drying process for these oils. This is because the oils do not dry like paint through the evaporation of a solvent or water. Linseed and other oils dry through the same process that generates fire- oxidation. There must be enough heat in order for spontaneous combustion to occur. That’s why you won’t see a recently finished table spontaneously combust from linseed oil treatment because the chair is open to the air.  

  

Linseed oil soaked rags pose the biggest risk for spontaneous combustion. The rags act as an insulator as the oil oxidizes. This allows the oxidizing oil to become hot enough to cause the rags to smoke and eventually ignite.  Also,  the bigger the pile of rags then the greater the risk of sudden combustion. Room temperature is also a factor.  Rags reach ignition temperature quicker in warmer rooms.  

Have no fear home improvement enthusiasts- there is a way to safely dispose of rags soaked with linseed or other oils to finish wood. These cloths should either be burned immediately following use or stored in a metal container filled with water and a metal lid to be disposed as hazardous waste.  

For more topical, relevant insurance information, risk management resources, or to get a quote from us, visit our website.  

Related Articles

• Is cooking oil flammable? (greenanswers.com)
• Before You DIY, Know the Dangers of Linseed Oil (abcnews.go.com)

   

Kasey McCarthy, CPCU  

A. G. Gordon, Inc.  

Moving Into Fall

Some Things to keep in mind moving into fall. At A. G. Gordon, Inc. we wish everyone a peaceful and safe seasonal transition.

Grill Safety:  With Summer winding down, everyone is trying to get in as many cookouts as possible before the weather gets cooler.  Be sure to check your propane tank to be sure you have enough to last – nothing more frustrating than to run ‘out of gas’ in the middle of a meal!  Also be sure to watch children around the grill – smaller kids don’t understand the danger of burning themselves. 

It’s Back to School time!  Be sure to be on the lookout for kids waiting for the school bus.  And most importantly – be aware that school buses make frequent stops!  Be sure to stop not only behind the school bus, but also in front of it.  Kids will be entering and exiting – let’s keep them safe!

Summer is over and what a wonderful one it has been.  With Fall in the air, now is the time to do those all important home checkups.  Have you had your furnace cleaned for the upcoming heating season?  Covered the Air Conditioner unit?  Checked the roof and windows to be sure all are secure?  Winterized the lawn mower?  Covered the pool? Click here for our Homeowner’s Checklist to complete.

Moving into Fall, it’s been easy to forget some of the important things like health checkups, etc.  Before the colder weather comes, why not schedule an appointment for a physical?  How about a dental checkup?  And why not schedule time with your physician for those all-important flu shots?  Then relax and enjoy all the upcoming holidays!

Sandi Cornell
Ratings Expert, A. G. Gordon, Inc.

And for more insurance information, resources, and to get a quote, visit our website, www.agordon.com.

Home Project Snowballs

A true story from the life of an agent on staff:

We were looking forward to replacing our exterior door and because it seemed manageable, planned on doing it ourselves.  In retrospect, it was probably a mistake.  My husband removed the door frame including the threshold and we found what we believe are termites and carpenter ants along with the damaged sill and other areas.  At least it seems to be isolated to that small area.   He tore out the affected areas and sprayed with the old toxic chemicals that were on hand.  We made multiple trips to Lowe’s and Home Depot to pick up supplies and more spray to treat the affected areas.  We’re not done yet and as it turns out, we’re replacing the deck now instead of next year so that he has easier access to replace the damaged area.  Unfortunately, our homeowners policy won’t step in either, as there are exclusions for insect damage, wear and tear, deterioration, and other damages that happen over time. 

If you’re more inclined to hire a carpenter than try this kind of project yourself, be sure to ask for a certificate of insurance, showing they have liability and workers compensation insurance.     This should be a minimum “legitimacy” level for any contractor, and is one good way to separate the pros from the amateurs!  For a project like ours, we should have found a pro!

Keep in mind that insect damage is not usually covered under a Homeowners policy:
“Additional Exclusions”. We do not cover, with respect to any property, any loss resulting from, caused by, contributed
to, or aggravated by any of the following:

1. Wear and tear, marring, or deterioration;
2. Inherent vice, latent defect, or mechanical breakdown;
3. Rust or other corrosion, mold, or wet or dry rot;
4. Contamination, smog, or smoke from agricultural or industrial operations, including smudging;
5. Settling, shrinking, bulging, or expansion, including resultant cracking, of pavements, patios, foundations, walls, floors, roofs, ceilings, fences, swimming pools, retaining walls, or bulkheads, whether resulting from growth of vegetation or otherwise;
6. Birds, vermin, animals, rodents, or insects, except that this exclusion does not apply to collapse under Coverages A and B, under which we do not cover loss involving collapse resulting from detectable decay or detectable damage by birds, vermin, animals, rodents, or insects, and that any ensuing loss resulting directly from a Peril Insured Against to property described in Coverages A and B is covered.

 

For more insurance information, as well as topical and relevant resources. Visit our website or recieve an online quote.

In the Doghouse

For many homeowners, a dog is a cherished member of the household; according to the Humane Society of the United States, there are 77.5 million household dogs in the U.S., a whopping 39 percent of all households. Normally, human-dog interaction is a positive experience for both animal and person, but lately, dog-bite statistics have been increasing. Dog bites accounted for more than one-third of all homeowners insurance liability claims paid out in 2009, costing $412 million and up 8.70 percent from 2008, according to the Insurance Information Institute.

More than 4.7 million people in the United States are bitten by dogs annually, and nearly 900,000 of those, half of them children, require medical care, according to the Centers for Disease Control and Prevention (CDC). Of those injured, 386,000 require treatment in an emergency department. The rate of dog bite related injuries is highest for children aged five to nine years old; the rate decreases thereafter. With more than 50 percent of bites occurring on the dog owner’s property, the issue is a major source of concern for insurers.

Dog Owner Liability
There are three kinds of law that impose liability on owners:
1. Dog-bite statute: The dog owner is automatically liable for any injury or property damage the dog causes, even without provocation.
2. “One-bite” rule: In some states, the owner is not held liable for the first bite the dog inflicts. Once an animal has demonstrated vicious behavior, such as biting or otherwise displaying a ‘vicious propensity’, the owner can be held liable. Some states have moved away from the one-bite rule and hold owners responsible for any injury, regardless of whether the animal has previously bitten someone.
3. Negligence laws: The dog owner is liable if the injury occurred because he or she was unreasonably careless (negligent) in controlling the dog.
The owner of a dog, however, is not liable if the dog injures a trespasser.

The CDC recommends the following steps regarding human-dog interaction:
 Consult with a professional (e.g., veterinarian, animal behaviorist, or responsible breeder) to learn about suitable breeds of dogs for your household and neighborhood.
 Spend time with a dog before buying or adopting it. Use caution when bringing a dog into a home with an infant or toddler. Dogs with histories of aggression are inappropriate in households with children.
 Be sensitive to cues that a child is fearful of or apprehensive about a dog and, if so, delay acquiring a dog. Never leave infants or young children alone with any dog.
 Have your dog spayed or neutered. Studies show that dogs are three times more likely to bite if they are NOT neutered.
 Socialize your dog so it knows how to act with other people and animals.
 Discourage children from disturbing a dog that is eating or sleeping.
 Play non-aggressive games with your dog, such as “go fetch.” Playing aggressive games like “tug-of-war” can encourage inappropriate behavior.
 Avoid exposing your dog to new situations in which you are unsure of its response.
 Never approach a strange dog and always avoid eye contact with a dog that appears threatening.
 Immediately seek professional advice from veterinarians, animal behaviorists, or responsible breeders if the dog develops aggressive or undesirable behaviors.

Using these strategies should hopefully allow your personal relationship with Fido to be a positive one.

For the full article, click here.

At A. G. Gordon, we have an opportunity to work alongside many outstanding businesses, one of which is Trouwe Hond, a professional dog training and kennel business that is truly top in its class. If you have a dog, check out their site. And for more insurance information, as well as risk-management solutions, visit the A. G. Gordon, Inc. Website, or click here to recieve an online quote.

Swimming Pool rules

A swimming pool can provide a refreshing respite from this summer’s heat, but be aware that it can also be a source of liability.   Be sure to comply with your town’s requirements for securing your pool – fencing, locks, etc.   Just a bit of caution can result in peace of mind, as well as safety for your family and guests.
And whether you have a pool or not, look to Gordon Insurance for being sure you have enough liability coverage in your home insurance in case there’s an accident at your home.