HR 3370 Homeowner Flood Insurance Affordability Act of 2014 – Detached Structures

Continuing our trek though HR 3370 Homeowner Flood Insurance Affordability Act of 2014, Section 13 addresses a change to insurance requirements for detached structures. This change establishes that homeowners are no longer required to carry flood insurance for non-habitable detached structures. So, detached garages and sheds are not required to be included on a homeowners flood insurance policy – by NFIP.  There is a caveat to this, these detached structures can be required to be insured if the mortgage lender felt it needed to be to protect the value of the mortgage on the property.

A bigger caveat to me, and one that homeowners should explore further should they be considering not carrying flood insurance on a detached structure is:

“If you choose to not maintain flood insurance on a structure, and it floods, you are responsible for all flood losses relating to that structure.”

This clause worries me. I wonder if this clause could allow an insurer to back out of paying for damage to another structure should they determine the damage was caused by the accessory structure, and not directly by the flooding? Homeowners have told me stories about situations where insurers, have had lengthy discussions to decide whether damage to a property was flood related or other storm conditions. Today a homeowner looking to minimize their payments for flood insurance could place themselves in a future bind. Should a homowner choose not to insure an accessory structure and have flood impacts create a situation where damage to an insured structure is determined to be caused by the uninsured detached structure what will be the financial ramification?

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