New incentives to storm-proof your house
Homeowners insurance rates are heading up in high-risk areas, but owners who fortify their homes can become eligible for discounts.
This post comes fromKelli B. Grantat partner site SmartMoney.
This year's unrelenting wave of storms and disasters -- from crippling winter snowstorms in the Midwest and Northeast to the current flooding along the Mississippi River -- has prompted a handful of states and insurers to push incentives to get more consumers to better fortify their homes against catastrophes.
But will the new efforts go far in limiting future damage?
With the rising costs of storms and other natural disasters, the intent is for homeowners to prevent damage before it happens. This month, North Carolina became the latest of several states, including South Carolina, Alabama and Louisiana, to require that insurance companies offer discounts to consumers who make their homes more resistant to weather damage. Reinforcing the roof could qualify; so might installing storm shutters.
Already insurers estimate that more than 5,000 homes are eligible for some of the available discounts -- a boon to the insurance industry, if in fact these modifications do prevent damage.
"There is more property at risk, so when these events do happen, it's more damaging," says Carle Hedde, head of risk accumulation for Munich Reinsurance America and vice chairman of the Insurance Institute for Business & Home Safety.
In addition to saving lives or keeping a home standing, the insurance savings can be substantial, advocates say. Depending on the state and extent of the modifications, discounts can run as high as 35% of the policy. An Alabama resident on the Gulf Coast, for example, might save up to 10% for installing wind-resistant windows and doors.
This is especially important for homeowners in high-risk areas that have already seen their insurance rates rise. State Farm, for example, offers policy discounts of up to 27% in Texas for impact-resistant roofing to limit hail damage. In Wyoming and New Mexico, it offers as much as 30% off.
And compared with the cost of rebuilding, fortifying a new or existing home can be relatively cheap. Depending on local codes and the disaster you're protecting against, it can add as much as 10% to your building costs, says Julie Rochman, chief executive of the IBHS. However, that might be just $1,000 to $2,000 extra. Smaller projects, like impact-resistant windows and doors, come at up to a 20% premium over standard ones. The Federal Emergency Management Agency, IBHS and FLASH all have recommendations that cost less than $100 too. Post continues after video.
Sales tax holidays
Beyond the new insurance rules, many states are also offering ways to cut the costs of disaster-proofing improvements. Virginia and Louisiana have both hosted annual hurricane-preparedness sales tax holidays during May since 2008, covering purchases such as backup generators and storm shutters. (Earlier this year, the American Legislative Exchange Council, a membership group of state legislators, passed a measure encouraging other states to do the same.)
Homeowners building a safe room may be eligible for federal or state grants. Mississippi, for example, reimburses 75% of the cost, up to $4,000, for a single-family shelter. And those impact-resistant windows and doors may qualify buyers for an energy-efficiency tax credit for 10% of the cost, up to $200 for windows and up to $500 total.
Not every project yields those financial benefits. Heather Paul, a spokeswoman for State Farm, says the insurer doesn't give discounts for fortified safe rooms -- an option for tornado protection -- because the unpredictable nature of storms makes it tough to assess whether a homeowner is really mitigating risk by installing one.
On top of that, don't expect to get back the thousands you spent on remodeling when you sell the property. A report by Remodeling Magazine found that a homeowner paying $14,718 for a backup power generator -- useful in areas where severe storms disrupt power -- recouped a little less than half, or $7,136, in extra value on the home at sale. In 2009, it would have recouped $8,429. "Until you've been without power for a week, you figure, who needs it?" says Sal Alfano, Remodeling's editorial director.
And such modification efforts may come up short, meaning they should never take the place of a good insurance policy. There's no way of knowing how much damage isn't done because of safety improvements, says Jean Salvatore, spokeswoman for the Insurance Information Institute.
More on SmartMoney and MSN Money:
TV Newsperson: Ma'am, tell us what happened.
Fema funds recipiant: Well, the flood came an' warshed ar house away agin!
TV Newsperson: Again?
Fema funds recipiant; Yep, an' thats the eleventh time a flood dun toolk ar house!
TV Newsperson: So what are you going to do?
Fema funds recipiant: We gonna rebuild! If'n the gummament keeps payin for it, we'll live here in this river forever!
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