Sunday, April 24, 2016

FEMA and Private Flood Insurance

The government is said to be actively considering ending private insurance companies’ participation in the federal flood insurance model. In the wake of Superstorm Sandy, allegations have emerged about fraud and unjust denials in the handling of claims. According to reports, the Federal Emergency Management Agency (FEMA) is being asked to reexamine its “Write Your Own “Insurance (WYO)  system which  is currently part of the National Flood Insurance Program (NFIP).WYO, which has been in operation since 1983 allows private insurers to write and service their own policies in their own names. The companies receive approximately 30% of premiums to cover their expenses and commissions.

Profit Versus Service

While it is accepted that profit and incentives are both understandable and needed to make participation in the flood insurance program attractive for private players, questions are being asked about whether the quantum of these incentives are commensurate with a federal program that is meantto assist those who suffer from loss due to flooding.

Another factor working against the private insurance companies is that there are about 80 companies selling this insurance using 80 different premium calculation systems and 80 different methods of calculating payouts. This multiplicity of systems leads to a huge amount of confusion and serious lack of clarity in the operations of the program. Additionally, it is also being claimed that since the WYO system does not cover the legal expenses of policy holders, the insurers are tempted into fighting homeowners in the courts.

The FEMA Response

Because of the claims and allegations being made, FEMA has agreed to reopen all the claims filed by Superstorm Sandy victims. These number about 140,000 and include over 2,000 that are presently in litigation.

FEMA also plans to review the complete insurance program in the light of the problems that arose after Sandy. It says that it will consider a wide range of reform options in an attempt to correct the flaws in the system and make it both fairer to policy holders and also more user friendly. A FEMA spokesperson recently said that “We expect WYO companies who partner with us to share FEMA’s values of putting survivors first.” The statement goes on to say that everything is open to evaluation, including the role of WYOs in the program.

What the Insurers Say

Insurance companies have strongly contested these allegations. They have denied any kind of wrongdoing and say that the WYO system does not offer any incentives for lowering payouts. They also state that over 99% of all Sandy claims have been paid and settled in as efficient a manner as is possible.

If you would like to know more about private flood insurance and how changes in FEMA policy will affect its operation, contact an insurance professional. He or she will be able to explain the ramifications of the system and guide you to the type and amount of insurance that is right for you. Flood insurance is a far more complex process than it appears to be on the surface and the guidance of an insurance agent will allow you to make the right decisions.

Thursday, April 14, 2016

Why Landlords Are Pushing Tenants To Take Renters Insurance

The requirement for tenants to have renters insurance is written into most leases. In the past this was often not followed up on because the renter felt it was not really important and the landlord felt that his own insurance would protect him if there was property damage. In recent times landlords have realized that renters insurance has much more to offer them and are now insisting that the requirement be met by the tenant. What are these benefits?
  • If there is a fire not caused by the tenant, the landlord’s insurance will not cover damage to the renter’s personal property and / or belongings or expenses incurred while the property is being repaired. Renters insurance will cover the tenant and prevent him from making claims on the landlord.
  • If an action of the tenant causes injury or loss to a neighbor, renters insurance will cover the compensation, leaving the landlord untouched. However, if the tenant does not carry a renters insurance, the neighbors may hold the landlord liable for damages.
  • The tenant’s personal property is covered while they are away from home so if they suffer any loss they will be compensated and their ability to pay the rent will not be affected.
  • The landlord gets peace of mind of knowing that if the tenant suffers any loss due to flood, storm, earthquake or other natural disaster, the renters insurance will cover the tenant and leave him with no reason to make unjustified claims against the landlord. The landlord in turn, will be free to focus on repairing his property, with no worries or distraction of claims for damages from the tenant.
  • If the tenant is sued for any alleged illegal activities conducted on the premises, the renters insurance will cover the tenant’s legal costs. This leaves his cash flow unaffected so continuing to pay the rent should not be a problem.
  • Because of the lowered financial liability for any loss the tenant may suffer or cause to others, the landlord’s relationship with the tenant remains largely unaffected by such matters and this reduces the strain on it. As all landlordsand tenants know, a good relationship is important to a mutually beneficial association.
  • Renters insurance is very cheap, the tenant cannot complain about any unfair demands being placed upon him. For example a policy that covers up to $15,000 in property damage and $100,000 in liability can cost as little as $200 per year. In fact, cross line discounts are often offered with auto insurance which could reduce the cost even more.
  • The tenant, also has peace of mind, confident in the knowledge that their possessions are covered against loss or damage and that their liability for any activities that may occur in the rented premises is significantly reduced and will more than compensate the marginal additional outflow that the premiums for the policy may cause.
Whether you are a landlord or a tenant, you need to be aware of the benefits and implications of renters insurance. By protecting the tenant, renters insurance reduces the monetary loss that they may have to face. By doing this the strain on the tenant’s finances is reduced which in turn will enable them to make their rent payments and so not place a financial burden on the landlord. Renters insurance is one of those rare polices where the benefits are shared by two parties. Contact your insurance broker for more information on the need for and benefits of renters insurance.