Tag Archive for flood

Who does the FHA think they are?

I wish I had a dime for everyone that has said this over the years?

Insurance frustration

The FHA is driving me crazy

The FHA and Fannie mae can control your lives.They tell you what to do and they expect complete compliance without exception.

So What is FHA looking for when it comes to insurance?
In reality, nothing more than what you should have and what is prudent. The only problems arise, when they try to interpret what you have given them. Their terms and nomenclature seem to differ from the insurance industry.

Here is what they require:

  1.  Hazard insurance this is your basic property insurance for fire and other perils. They require 100% replacement cost ( this is one of those terms where the problems start )
  2. Liability insurance standard stuff that we all have with a $1,000,000 limit ( they don’t understand the aggregate part however)
  3. Fidelity (dishonesty insurance). They are selective here. They only require you to have it for associations with over 20 units. Sometimes they make you add the property manager as an additional insured. They want you to have a limit of 3 months fees and enough to cover the reserves. ( You can see that this floating number can be an issue)
  4. Flood- If the FHA thinks they can figure out flood insurance, I might hire them, because the other government entity that is more beaurocratic than the FHA if the NFIP. More letters means more confusion. You need it, up to the replacement cost, but the NFIP won’t sell it to you in all cases. They also won’t let you buy it on your own, the association needs to buy it. So, like in my condo, the other owners ( no mortgages ) don’t want it, or they don’t need it ( above grade floor) you have no choice but to go on your own for it.

These are the basic requirements, and they are fair, and you probably already have the coverage, but just wait till they have to approve it. If it is not in their language, WATCH OUT!

It is the FHA’s game and you have to play by their rules, or you do not get approval. More than 30% of all condo loans are FHA backed and approved.

 

Condominium Flood insurance RCBAP

How do you insure flood for your condominium association?

There are options, but most of them fall back on the government and the NFIP.

If you really want to confuse someone, involve insurance and the government. Both of these entities create more obfuscation than any other industry I can think of.

So how do you navigate the flood issue for your condominium association.

First reach out to your agent or company. Let’s be honest here, most of them don’t know their ass from their elbow when it comes to flood. I admit, it baffles and befuddles me all the time. If you can, reach out to the NFIP ( national flood insurance plan). They have so much data, resources,help and brochures that it will consume you. But they are your best resource, if you are looking for the right answers.

What is RCBAP?

RCBAP stands for Residential Community Building Association Policy.

The RCBAP is set up to cover condo associations through the NFIP. You must be a condo complex, not a HOA or a PUD. You must have at least 75% of your floor space be residential.

What you get?

You get a policy covering the condominium with limits up to the building value or $250,000 per unit or whichever is less.

Ask your agent for more details.

Zurich offer of Excess Flood insurance

Zurich announces it will offer Excess Flood Insurance

Last May Zurich announced that it would fill the gap on flood insurance. Condominiums face a huge problem in that the only place to turn often is the NFIP ( the national flood insurer).

The problem is that they will only cover up to $250,000. More if they consider cover for each unit owner @ $250,000.

There are not enough insurers that cover excess of the NFIP.

Companies and programs for flood have popped up and gone away as fast as they have started. One major claim, or a restrictive reinsurance market, and the opportunity for coverage is gone.

The industry needs more insurers to step up and fill the coverage gap for flood.

flood and your first floor condominium

The litigation landscape blog writes in a recent blog titled:

“The bottom is out”

Residential Condominium Building Association National Flood Insurance Program Flood Policies do not cover most personal property items below the first elevated floor.  Most post FIRM residential condominium buildings along the New Jersey shore have an elevated first floor.  In many instances the space below the first floor where the garage, breezeway, utility and storage areas are located is enclosed, and has been improved.  In some cases these improvements even include showers and toilets which traditionally may have been in secondary structures in older beach community developments.  Most of these improvements are not covered.  If someone promised you insurance coverage for improvements and personal property stored in these areas you may have a claim against them.

7 things not covered by a condominium flood policy

Flood does not cover it all.

7 things that are not covered by condominium flood policy:

  1. Limited coverage in basements, crawl spaces and property below the grade floor ( even if it is an elevated walk out basement)
  2. Damage caused by moisture, mildew, or mold that could have been avoided by the property owner
  3. Money, metals,and valuable papers
  4. Property and belongings outside the condominium building like trees,bushes,wells, septic system,fences,seawalls,hot tubs and swimming pools.
  5. Living expenses if you have to move out after the loss
  6. financial loss
  7. vehicles like cars and rv’s and their parts
  8. Bar Bill

flood damaged condominium

 

 

 

 

 

Know your policy insuring agreements, exclusions and terms.

3 facts about condominium flood insurance

flood insuranceThere is not enough time in a week to explain the national flood program, but there are three basic facts you should know.

1. Contents coverage must be purchased separately.

2. Flood insurance is not a valued policy. A valued policy pays the limit of liability in the event of a loss. for example: your condominium is a total loss, and you had $1,000,000 in coverage. It costs $1,500,000 and you have that much coverage, it will pay that amount. Flood insurance pays just the replacement cost or the actual cash value of the actual damages, up to the policy limit.

3. It is NOT guaranteed replacement cost policy. A guaranteed replacement cost policy pays the cost to rebuild the condominium regardless of the amount covered in the policy declaration page. Flood does not pay more than the limit.

Always check your policy and do not confuse the terms of each. They are mutually exclusive.

FHA Guidelines for Condominium Insurance

It is estimated that 30-40% of all condominium loans now are backed by the FHA. It is very important that your condominium association seek and get approval.

Loans are easier to come by, and rates are better, and the loan is backed by the federal government.

Good deals come with strings attached. The association has to meet many criteria to be approved.

We will deal with the insurance section, and what is required.

You are required to meet the following criteria:

  1. 100% replacement cost- The association must carry enough insurance to completely rebuild the structure back to it’s original design, layout and appearance at the time of loss ( no unit owner “gap” insurance is eligible).
  2. General liability insurance- at least $1,000,000 per occurance
  3. Crime coverage- Fidelity or employee dishonesty coverage covering the association and including naming the property manager as additional insured. ( FHA backs down ) This is for associations with 20 or more units. The amount of coverage to be equal to 3 months assoc. fees and total amount of the reserve funds.
  4. Certain Flood Zones are not eligible.
  5. Unit owners must carry 20% of the value of their unit as coverage “A” building coverage on their unit owners homeowners ( HO_6) insurance.

Getting FHA approval is no small feat, but it has it’s benefits. Insurance is only a part of the process, but if you comply with these five steps, you should be on your way to approval.