Continue flood insurance after mortgage paid off?

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mlagrange
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Joined: Mon Feb 19, 2018 6:22 am

Continue flood insurance after mortgage paid off?

Post by mlagrange » Fri Aug 17, 2018 6:54 am

Hello - I flooded out in Harvey last year, and my flood insurance is coming up for renewal next month.

In my particular situation, my damage was not severe; I got about 6" in the house, enough to make a decent claim. The insurance company paid off very well, but instead of doing repairs, I used the flood insurance money to pay off my mortgage.

(I *did* have the bottom 18" of sheetrock & insulation removed, and the house was fogged & sprayed multiple times to prevent mold, so it's not a health risk. There is a layer of foam board under my Hardi Plank, so heat & cold has not been a problem. I am single, so no wife to complain. In short, I’m good :-D

This house was built in 1951; it also flooded back in TS Allison. The neighborhood is now in "the flood plain"; all new construction is req'd to be at least 48" up off the ground. My plan is to live in the place for 3-5 more years (about the time I expect to retire), w/o a mortgage payment, and sell it as a tear-down. Comparable tear-down’s/lots in my neighborhood are selling for $300K+.

The flood insurance premium will be ~$1,800. I'm on the fence about whether or not to renew it. As long as I don't flood out again more than 18", I would only need to muck the place out and fog again. Is there something blindingly obvious anybody can point out, either way, that would help me decide?

Thanks

thx1138
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Re: Continue flood insurance after mortgage paid off?

Post by thx1138 » Fri Aug 17, 2018 7:13 am

I’m not familiar with flood insurance but I thought most was via NFIP meaning it is massively subsidized by the government? So while 1800 seems like a lot that implies a rather high probability of more flooding?

In general if you don’t need insurance and can self insure it is better to self insure. But in the case the insurance is subsidized that often isn’t the case.

To me it seems if you need to live in the house post flood then purchase the insurance. If on the other hand you are free to relocate after a flood and just tear down the property to sell the lot then you don’t strictly need the insurance. But be sure you understand and plan for the costs of even doing that. Presumably there will be costs associated with selling and likely it will take a bit to find any buyers after a disaster.

Curious to see other’s thoughts who are more familiar with flood prone properties.

SueG5123
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Re: Continue flood insurance after mortgage paid off?

Post by SueG5123 » Fri Aug 17, 2018 7:15 am

Sounds like you can afford and are willing to self insure. So be it. Do that.

We live in Katy in the “500 year flood plain.” The water got within 6 feet of the front door and we had begun putting furniture up on blocks. (We have a one storey house and didn’t even know where we could evacuate to with our pets.) We paid off our house recently and, damn straight, we’re buying flood insurance. It’s worth it to sleep at night!

invst65
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Re: Continue flood insurance after mortgage paid off?

Post by invst65 » Fri Aug 17, 2018 7:56 am

I still have a mortgage but for some reason I'm one of only 3 houses in my neighborhood that isn't required to have flood insurance. So basically, I'm self-insured for flooding even with a mortgage. My house is less than a mile from Tampa Bay which caused me considerable angst last year when the Bay was emptied by Irma, the first hurricane to hit Florida in 10 years. Fortunately, it filled back up during low tide and there was no flooding at all but I was calculating in my head if all the money I had saved by not buying flood insurance for 11 years was going to cover the cost of the damage.

I resolved to buy insurance this year but at at this point in time I've procrastinated too long, once again. I think there is a 90 day waiting period and hurricane season will be over by then.

orlandoman
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Re: Continue flood insurance after mortgage paid off?

Post by orlandoman » Fri Aug 17, 2018 8:05 am

Check to see what your premium would be with a higher deductable. Here's information from about 2-3 years ago:
$5,000 deductable - 20% discount
$10,000 deductable - 40% discount
"Don't Believe Everything You Think"

stan1
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Re: Continue flood insurance after mortgage paid off?

Post by stan1 » Fri Aug 17, 2018 8:12 am

Why not sell the place now and move into an apartment for 3-5 years? I'm not sure why you want to own this problem. If you can sell it for $300K today there's really no way you can assume it will be worth more than that in a few years. If the area floods a few more times even the most stubborn Texans may decide building and buying a house in a neighborhood that floods frequently is a bad idea.

iasw
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Re: Continue flood insurance after mortgage paid off?

Post by iasw » Fri Aug 17, 2018 8:23 am

How much did it cost the insurance to make the repairs? Keep the insurance. It isn't a question on if it will flood again, but when.

You could move sooner, if that makes sense.

basspond
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Re: Continue flood insurance after mortgage paid off?

Post by basspond » Fri Aug 17, 2018 8:27 am

invst65 wrote:
Fri Aug 17, 2018 7:56 am
I think there is a 90 day waiting period and hurricane season will be over by then.
The waiting period is 30 days.

Back to original post, it can’t be determined with any confidence what year event flood (100, 500, etc) that was encountered with Harvey. Look at a map of the Houston area and you can see what the problem is. No major “lakes” on waterways to curb flood events. The only two real lakes are used for water storage so they released water to flood many more structures downstream and they knew this. Without these structures the flooding will still be a major problem.

We have only ourselves to blame because we gave our government officials the power to spend billions of dollars on sports stadiums while our infrascture improvements were overlooked. (Remember to vote in the Poposition A bond election.) Look at any waterway now and there is an enormous amount of debris that still need to be removed and if not will impede the flow of these waterways to work properly.

Do what you feel is best using all the information. I can’t imagine anything worse then Harvey but we have not been here long enough to understand was Harvey a normal reoccurring event that could be worse next time or one that will never happen again.

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Watty
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Re: Continue flood insurance after mortgage paid off?

Post by Watty » Fri Aug 17, 2018 8:38 am

mlagrange wrote:
Fri Aug 17, 2018 6:54 am
My plan is to live in the place for 3-5 more years (about the time I expect to retire), w/o a mortgage payment, and sell it as a tear-down. Comparable tear-down’s/lots in my neighborhood are selling for $300K+.
stan1 wrote:
Fri Aug 17, 2018 8:12 am
Why not sell the place now and move into an apartment for 3-5 years?
+1, or rent a house.

People mostly buy tear-down houses in very hot housing markets. If the market is cold in 3-5 years and there is a glut of houses on the market it may be very hard to sell your house as a tear down then.

It was not just during the housing bust in 2008 but I have seen a number of times when houses with "issues" were just not selling.

The rules about building in flood areas are always changing too. If the rules change for the worse that could also make your house much harder to sell.

runner3081
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Re: Continue flood insurance after mortgage paid off?

Post by runner3081 » Fri Aug 17, 2018 9:00 am

Your policy is rather costly. I am not sure what we would do in that situation.

Last year, maps were redrawn and flood insurance was no longer required for our mortgage. Everyone I have talked to has dropped it. We have kept it. Our mortgage should be paid off in a few months.

I absolutely plan to keep it. Of course, it is only $277 per year.

jminv
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Re: Continue flood insurance after mortgage paid off?

Post by jminv » Fri Aug 17, 2018 9:03 am

mlagrange wrote:
Fri Aug 17, 2018 6:54 am

The flood insurance premium will be ~$1,800. I'm on the fence about whether or not to renew it. As long as I don't flood out again more than 18", I would only need to muck the place out and fog again. Is there something blindingly obvious anybody can point out, either way, that would help me decide?

Thanks
NFIP is subsidized insurance so it underprices your risk. If you don't have it, you are assuming more risk than what you had been paying for your policy. You might think your policy is costly but for me that would mean that you are in a very high risk area which is evidenced by prior flood damage. With NFIP, the government is taking on part of your risk.

If you had another claim, you could walk away with money to tear down your house and have a downpayment for a new house. Also, if there was another big flood you might have tear down competition in the area when you want to sell it for that purpose so would receive a lower price. This would help compensate you for that.

The mortgage wouldn't really play a role for me. I'd want insurance in both cases. It's like the posts about whether or not to drop homeowner's because the mortgage is paid off. The risk doesn't disappear just because the mortgage is paid.

Topic Author
mlagrange
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Joined: Mon Feb 19, 2018 6:22 am

Re: Continue flood insurance after mortgage paid off?

Post by mlagrange » Fri Aug 17, 2018 4:04 pm

Thank you all for your replies. I probably should have mentioned that this house/lot is in a very hot neighborhood; it's very close to downtown Houston, just on the north side of I-10, so it should keep it's value. As a live-in house, the value has dropped like a rock, but as a lot, the value is still relatively high, as the trend now is for buyers to tear down the old '50's ranch style's, and rebuild their new, upscale McMansion's 48"+ off the ground.

As for selling now, I would never do that. I am living now without a house note, which is something I thought only very lucky people got to do.
If I were to sell, I'd just have to go somewhere else, and start making mortgage or rent payments again.

The point about the low cost of flood insurance relative to the risk is the best point, I think. It may flood again, worse than 18". Population density in Houston is rising, Houston itself is sinking, everything is getting more expensive. I'm going to keep the insurance, and sleep better at night.

Thanks again for your responses.

mouses
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Re: Continue flood insurance after mortgage paid off?

Post by mouses » Fri Aug 17, 2018 7:56 pm

basspond wrote:
Fri Aug 17, 2018 8:27 am

I can’t imagine anything worse then Harvey but we have not been here long enough to understand was Harvey a normal reoccurring event that could be worse next time or one that will never happen again.
Put your money on recurring. My understanding is that the warmer temperatures increase the ability of air to hold moisture. Then you get torrential rains. Flooding is going to get worse everywhere either because of that or rising sea level.

Update after reading previous post: add in subsistence, so three factors in favor of flooding.

CppCoder
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Re: Continue flood insurance after mortgage paid off?

Post by CppCoder » Fri Aug 17, 2018 8:12 pm

mouses wrote:
Fri Aug 17, 2018 7:56 pm
Update after reading previous post: add in subsistence, so three factors in favor of flooding.
Subsidence?

HIinvestor
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Re: Continue flood insurance after mortgage paid off?

Post by HIinvestor » Fri Aug 17, 2018 8:33 pm

We keep properties where flood policies are available insured so we can sleep well at night. Same with hurricane coverage. We have no bank holding a note requiring us to insure but with all the extreme weather, it seems prudent these days.

(I admit for a few years, we didn’t have the policies because no one required it, but we figured the premiums were worth the protection so we got the policies back in force.)

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Watty
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Re: Continue flood insurance after mortgage paid off?

Post by Watty » Fri Aug 17, 2018 10:17 pm

mlagrange wrote:
Fri Aug 17, 2018 6:54 am
In my particular situation, my damage was not severe; I got about 6" in the house, enough to make a decent claim. The insurance company paid off very well, but instead of doing repairs, I used the flood insurance money to pay off my mortgage.
One thing to consider is that if you are flooded again and have another claim the fact that you do not do the repairs may be an issue with getting paid for any future damage.

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