HR 3370 Homeowner Flood Insurance Affordability Act of 2014 – Higher Deductibles

Okay, so Section 12 of HR 3370 deals with increasing the available deductible, the amount you pay for damages before the insurance would kick in. At present the maximum deductible is $5,000, the proposal would increase the maximum deductible to $10,000. The goal of this increase is to allow some people to choose lower rates, but at a higher risk to the property owner. The act does require notice to homeowners about their  responsibilities should they choose the higher deductible.

I have a few concerns with this provision. The average annual flood insurance cost not to exceed 1%  of total premium value discussed earlier is, most likely, going to be tied to some level of deductible. If a homeowner can only attain this by paying a higher deductible, there may be little true savings. Clearly this bears watching.

Another concern is that, with a high deductible, too many homeowners will find themselves over their heads when they need to file a claim.  For instance, Dennis has 17 repetitive loss properties. The insurance payouts for these properties since 1978 is slightly over $500,000 all-time, or about $30,000 per property. Repetitive loss properties have had two or more losses of $1000 or more since 1978. So, given these parameters, the average claim is under $15,000 for even the properties most in harms way. Taking it a step further, since 1978 NFIP has paid out $1,450,308 over 233 claims, or about $6,200 per claim.

Large deductibles are not in the best interest of Dennis homeowners unless the annual payments are well below that 1% level.


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