Your Views -- Proposed Flood Insurance Changes
Published: September 25, 2013   |
Updated: September 25, 2013 at 06:45 PM
The huge anticipated Flood insurance premium increases will virtually render many waterfront homes (the structure) worthless as no buyer will or logically can afford to pay the kind of premiums going into effect on October 1st. Buyers will simply make offers for the value of the land only and once purchased, demolish the house to rebuild. That may be good for FEMA but equity for retirement and net worth of those faced with this situation will be seriously eroded.
Soon, after the higher premiums take effect, virtually all of the home owners who own property below the Flood Plan elevation, especially those who own a home built pre 1974 requiring flood insurance will be faced with little choice, pay the exorbitant premiums or pay the mortgage off and self insure. How many will pay the mortgage off if their devalued house is worth less than the mortgage balance? They will simply abandon the property to the bank and the economy will experience another banking and real estate crisis. Additionally, the tax value on these waterfront homes will be diminished. This devaluation will have to be absorbed by either an increase in the millage affecting other non-flood zoned homeowners or, a budget crisis will occur within the respective coastal counties and cities.
The principle of insurance is a way of protecting individuals' risks by pooling money and spreading the risk to many. However, actuarial analysts have isolated those properties with higher risks increasing premiums to unreasonable levels and therefore forcing people to self insure. This reduces the number of people paying premiums thus creating an unaffordable situation for those who must insure and defeats theory of insurance.
With a national natural disaster insurance program, many types of natural disasters could be insured. While we may have a threat of hurricanes in Florida, we're not as prone to earthquakes as in California, tornados in Kansas, river flooding in Colorado or wildfires in Nevada.
Having one national natural disaster program in which every American pays to protect all Americans from the many types of natural disasters that occur no matter where makes more sense.