Episode 131: The FEMA Coverage Increase: Should You Take It

In this episode of the podcast we are discussing the FEMA coverage increase should you take it?

We want to look at a few things

1. Is it worth the money
2. How long before it takes effect
3. Will it pay out

We always hear people getting very frustrated about the FEMA rate increases, however one thing many people do not pay attention to is the FEMA coverage increases.

So what is the FEMA coverage increase?

FEMA will offer an additional 5% in coverage on policies that qualify for more coverage. Now if you have a $250,000 maxed out policy you won't get this offer. It would only be on policies that do not have the max coverage.

So when is this increase offered?

FEMA offers this coverage increase at renewal. They will send out a letter of what the rate will be with the current coverage and what it would be with the increase. The increase is normally very affordable. Recently we had a client that was going to pay a difference of about $50 a year.

The great benefit is if you decide to go with the increase it is effective immediately at renewal.

So what if you want more coverage?

When we do a yearly flood analysis review with clients we discover that more than the 5% coverage increase is needed.

Well anything over the 5% has a standard 30 day wait period.

The next big question is will I actually get this amount of coverage during a claim?

Maybe or Maybe not.

Let me tell you a story about a property owner that discovered the FEMA guidelines for claim pay out the hard way.

You see this property owner had carried flood insurance for many years they had about $100,000 policy on their home.

However both claims they had paid out less than $50,000.

As you can imagine the property owner was pretty upset and not sure what to do.

You see when the property owner set this policy help years before no one had explained the FEMA guideline to them.

FEMA offers a replacement cost and actual value condition on their policies.

If the home is insured for at least 80% of the replacement cost or has the max coverage available then replacement cost would pay out on the policy. If not the actual cash value condition would set in. This is exactly what happened to this property owner.

So this is something you really want to look at when reviewing these FEMA coverage increases. If you are not insuring your property for 80% of the replacement cost or getting the max coverage then you might be wasting your money on the FEMA coverage increase.

So when you get this letter in the mail from FEMA hopefully the answer to these three questions will help you make the best decision on the FEMA flood insurance coverage increase.

If you have additional questions about these coverage increases or what your flood insurance options are then make sure to visit our website. You can also subscribe to our YouTube channel where we do daily flood education videos. Remember we have an educational background in flood mitigation, which means we are here to help you understand flood risks, flood insurance, and mitigation your property against flooding.