Premiums higher for vacation homes
Premiums higher for vacation homes
If you’ve followed the news this winter in Greater Boston, or the past couple of weeks in Texas, you can’t have missed the extreme damage that flooding can bring, especially to coastal areas and other flood zones. Which is why it should not come as a surprise that the National Flood Insurance Program has announced that, beginning this spring and summer, flood insurance premiums are going up.
The federally backed program announced an annual surcharge of $250 will now be charged to people who have flood insurance on vacation homes, while an annual surcharge of $25 will be charged to owner-occupied properties in flood zones.
Now, some people may think the $250 surcharge on vacation homes near the shore is far too high. But, while I virtually always lean toward being consumer-friendly, frankly, I think that these people are wrong. Why?
• First off, the added cost of flood insurance is not even close to exorbitant. If you want the added benefits and enjoyment of living in, say, Weston or Dover, both your initial purchase price and ongoing property costs are going to be higher. If you want the enjoyment of living near the ocean, your costs are going to be higher, too.
Admittedly, while I understand why there is a discrepancy between what owner-occupied homeowners have to pay on flood insurance and what vacation homeowners have to pay — the vacation home is a luxury, the year-round owner-occupied property, arguably, is or has become a necessity — I do think the discrepancy is probably too large. But, again, if you’re living near the coast, you have to expect the ongoing costs of owning are going to be higher.
• Second, if you own property in a flood zone, especially one close to the ocean, you are, frankly, crazy not to have flood insurance, even at this higher cost. Indeed, the fact is, if you can’t afford $600 to $800 per year more for flood insurance on a property in a flood zone, especially on a vacation home, you can’t afford the property.
The average annual fee for flood insurance on homes in flood zones is $638, according to the Federal Emergency Management Agency. Such federal flood insurance is subsidized by taxpayers. So, indeed, a very good argument can be made that flood insurance costs should be higher.
Why? Again, if you want the enjoyment of living near the coast, then it should be your responsibility to assume the cost of the higher risk. For example, if you buy a Cadillac, or a Lamborghini, your car theft insurance is going to be higher. Does that mean taxpayers should subsidize your higher insurance costs on that more expensive — and more enjoyable — car? I don’t think so. Same with the property located near the coast.
