WARREN — Am I covered?
That’s the first question many Warren residents asked after the sky opened up, the rain poured down, their basements flooded and the waters receded, leaving possessions, appliances and structures damaged earlier this month.
Mayor Jim Fouts said many people weren’t covered by insurance, and he’s pledging to take steps to change that.
Calling it the most important proposal he has made over his years in government, Fouts said he’d make requests at the state level to bring about what he labeled “truth in flood insurance.”
Fouts said he’d heard from “hundreds” of residents in the first two weeks after the Aug. 11 flood that damaged an estimated 22,000 Warren homes. And, he said, more residents are stepping forward as they struggle to bear the costs of repairing damaged properties and replacing lost contents.
“The No. 1 complaint I have is residents who thought they had flood insurance, but they are not covered,” Fouts said. “They have a right to be upset.”
Fouts said he’d propose mandating “a minimum flood insurance requirement for homeowner’s policies at reasonable and competitive pricing.” He said insurance companies should provide a second document to summarize coverage limitations and items not covered.
He also said he’d press for notification “in bold dark print” on the first page of a homeowners’ policy if basement flooding is not covered and would like to see more prominent disclosures of flood exclusions at the point of insurance sale.
Incentives for insurance companies that offer substantial flood coverage, an opt-out requirement for homeowners who choose not to purchase flood insurance, and protections from insurance cancellation or nonrenewal for residents who make flood claims were also noted in the mayor’s proposal, outlined in a media release.
Fouts said he mentioned the proposal to Michigan Gov. Rick Snyder when they toured flood-damaged neighborhoods with U.S. Rep. Sander Levin earlier this month.
“I told him insurance is No. 1,” Fouts said. That is the real problem. Most people thought they had basement insurance coverage and they didn’t. It is fundamentally unfair to tell people they have home insurance and then to say, when their basement floods, it isn’t part of the home.”
According to information prepared by the Insurance Institute of Michigan, most homeowners’ insurance policies do not cover damage caused by sewer and drain backups, the type of flooding widely reported across much of metro Detroit after a storm system dumped more than 5 inches of rain over three hours on Aug. 11.
While coverage and limits vary by insurance company, policies covering sewer and drain backups are available for damages between $5,000 and $10,000 or more through some insurers for as little as $40 a year with a deductible.
That’s a small sum for residents left dealing with damage to finished basements, appliances and home heating systems.
Flood insurance is completely different.
Michigan Association of Insurance Agents CEO Bev Barney, whose organization represents 800 insurance agencies in the state and between 6,000 and 8,000 individual members at those agencies, said all flood insurance coverage is backed by the federal government because the scope and frequency of flood damage makes it difficult to price for private companies.
“It’s catastrophic in nature. When you get that combination of things, it’s infrequent and it’s catastrophic. In the private marketplace, it’s very difficult to determine a rate that’s true to form,” Barney said.
Flood insurance is typically costly for homeowners who reside in an identified floodplain. Residents living outside of identified floodplains are eligible to purchase flood insurance if their community has qualified for the National Flood Insurance Program.
It is important to note that flood insurance does not cover flooding related to sewer and drain backups.
Barney said communicating with your agent regularly and knowing the details of your policy is the best way to ensure your home and belongings are protected.
“The bottom line: talk to your agent; stay in touch with your agent,” Barney said. “Not everything is covered, and there are limitations and deductibles. It’s the only way we can keep it affordable.”
She said making certain types of coverage mandatory could be problematic for a number of reasons.
“What’s important to you might not be important to somebody else,” Barney said. “You reach a point where you have so many requirements on consumers and the marketplace that you hurt the marketplace.”
Barney said flood insurance reforms would be impossible to enact at the state level because the program is backed by the federal government.
Requiring changes for insurance companies offering sewer and drain coverage would also be difficult, because the effectiveness of that would still rely on the due diligence and attention to detail of homeowners who would have to consider paying for policy endorsements covering events that might happen once or twice in a lifetime, or never.
“You still are relying on the individual insurance buyer to read that,” Barney said. “It’s not about something being in bold print. How do you entice a customer to read it and understand it?”
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