Tip of the Month May 2007

Marketing Tips and Barrier Busters

ONE–MONTH COUNTDOWN TO THE 2007 HURRICANE SEASON BEGINS MAY 1st ; FEMA URGES CONSUMERS TO PROTECT THEIR PROPERTY WITH FLOOD INSURANCE 
May 1 marks the official countdown to the 2007 hurricane season (starting June 1) and FEMA's National Flood Insurance Program (NFIP) reminds consumers there is typically a 30–day waiting period before a new flood insurance policy takes effect. With experts predicting another above–average hurricane season just around the corner, now is the time for people to protect their home and property against the number one natural hazard in America—floods.

We have identified some of the toughest ‘barriers' and offer talking points to help you ‘bust' through to the sale.

I already have homeowners insurance.
Most homeowners insurance does not cover floods. It does, however, cover fires. Now consider this: during a 30-year mortgage, you have about a 9% chance of experiencing a fire…and a 26% chance of experiencing a flood. That's about a 3 times greater chance for a flood than a fire!
Floods? That's what disaster assistance is for.
Available only when the President declares a disaster, Federal disaster assistance is usually a loan that you must pay back with interest. For a $50,000 loan at 4% interest, your monthly payment would be around $240 a month ($2,880 per year) for 30 years, in addition to your mortgage loan that you still owe on the damaged property. Plus you would need to buy and maintain flood insurance for the life of the loan.
Compare that to the average premium for $100,000 of flood insurance coverage, which is about $500 a year (less than $42 a month). Plus, when you submit a flood insurance claim, you are compensated for all covered losses whether or not a disaster has been declared – and you do not have to pay it back.
I live on a hill and am not at risk.
If you live on a hill or in an area that has never been flooded, your risk may be significantly reduced, but it is not eliminated. Aside from major storms like hurricanes and tropical storms, flooding can be caused by heavy rains, melting snow, inadequate or clogged drainage systems, and failed protective devices such as levees and dams.
I do not live in a flood zone.
Everyone lives in a flood zone – it is just a question of whether you live in a low to moderate or high risk area. While flood insurance is required in high risk areas, 20 to 25% of all flood insurance claims are from low to moderate risk areas.
Flood insurance is too expensive.
The average flood insurance premium is around $500 a year (less than $42 per month). If you live in a low to moderate risk area, you may qualify for a Preferred Risk Policy with a premium starting at $112 per year. Considering that even a few inches of water can cause thousands of dollars in damage, the annual premium is well worth the financial protection from floods.
My area has never been flooded.
The fact that a flood has not occurred recently doesn't mean one has not happened in the past or that one will not happen in the future. Flood history is just one element used in determining flood risk. Other factors include your community's rainfall and river flow data, topography, wind velocity, building development (existing and planned), and community maps.
I have already experienced a flood - that will not happen again in my lifetime.
You may have heard of the "100-year flood" and may be thinking that it only happens once every 100 years. However, this term is misleading and actually refers to the flood elevation that has a 1% chance of being equaled or exceeded each year. It has nothing to do with the number of floods that may happen over the course of a lifetime. Thus, the 100-year flood could occur more than once in a relatively short period of time. Here are some additional thoughts to consider:

• Many areas of the country experience more than one flood in a lifetime.
• Some areas experience repetitive loss – two floods in a 10-year period. Over the years, FEMA     has paid almost $3.5 billion dollars in claims for repetitive loss properties.
• If you experience a flood, receive federal disaster assistance, and choose not to purchase and maintain flood insurance, you may become ineligible for federal disaster assistance if a flood occurs again, if it is determined that flood insurance would have paid for the damage.
• If you have a mortgage, your lender may now require you to purchase flood insurance.

I cannot purchase flood insurance, because my property has flooded before.
No matter how many times your home, apartment, business or condominium has been flooded, you are still eligible to purchase flood insurance, as long your community participates in the NFIP.
Flood insurance does not cover contents in my basement.
Contrary to what many believe, flood insurance does provide limited basement coverage. Though it does not cover finished walls, floors or ceilings, or personal belongings, it does cover structural elements, essential equipment, and other basic items normally located in basements. Imagine the costs associated with replacing the items listed below.
Building coverage includes:

• Furnaces, water heaters, air conditioners and heat pumps
• Electrical junction and circuit breaker boxes and required utility connections
• Unpainted drywalls and drywall walls and ceilings, including fiberglass insulation
• Foundation elements and structural support equipment
• Sump pumps
• Well water tanks and pumps, cisterns and the water in them
• Oil tanks and the oil in them, natural gas tanks and the gas in them
• Pumps and tanks used in conjunction with solar energy
• Stairways, staircases, elevators and dumbwaiters
• Debris cleanup

Contents coverage includes:

• Washers
• Dryers
• Freezers
• Food contained in freezers

Flood insurance does not cover common issues like seepage or leaks.
Generally, neither homeowners nor flood insurance policies cover damage caused by seepage, dry rot, or animal pests, as they are considered the result of poor home maintenance, and therefore preventable. However, flood insurance will cover damage caused by sewer or drain backup, or overflows from a sump pump or related equipment, if the event is a direct result of flooding.
I cannot buy flood insurance right before or during a flood.
You can purchase flood insurance at any time. Unlike some other lines of insurance, an approaching storm does not trigger a moratorium on flood insurance purchases. However, once you have applied and paid the premium, there is usually a 30-day waiting period before the policy becomes effective.
Though it cannot cover a "loss in progress," your newly-effective flood insurance policy will provide coverage for any future flooding. The bottom line? Do not wait until after the storm warnings to buy flood insurance!