Friday, August 31, 2012

Positive Changes in the National Flood Insurance Program

If you missed the big changes in the national flood insurance program last month you were not alone. As the country watches the Democrats and Republicans duke it out over the coming primaries some productive legislation happened with regard to flood insurance.

On July 6, 2012 President Obama signed the Biggert-Waters Flood Insurance Reform Act of 2012 extending the National Flood insurance program through 09/30/2017. The act is more than the usual kick the can of problems with the NFIP down the road for a few months or another year. This act overhauls the program which I hope puts the flood insurance program back on a strong financial footing.

One of the biggest changes in the NFIP is the phasing out of subsidized rates on properties with more than one loss. That might seem like common sense to most laymen but the concept has been lost on the NFIP for decades. We will see more dwellings that will be able to participate in the FEMA buyout program whereby high-risk locations with dwellings can be purchased and abated. FEMA will now be able to purchase re-insurance on behalf of the NFIP and be proactive in transferring risk. A mapping advisory council will be established to help FEMA modernize its flood mapping. This is crucial as many of the country’s high flood risk communities have inadequate mapping.  For the first time private insurance will be allowed in lending. In the past only government backed flood insurance was allowed in mortgage applications where flood insurance was required. Watch for greater rate increases in flood rates over the next several years as the NFIP tries to match rates to losses and become self supporting. One of the changes in the Flood Insurance Reform Act allows for an annual premium cap of 20% which will allow the NFIP to take greater rate increases. The deductible for flood insurance in preferred risk zones will be increasing from $1,000 to $2,000.

If you are getting the picture, flood insurance will become more expensive over the next several years and while consumers will not be happy, the changes will allow the NFIP to continue in the future as a legitimate insurance program and not a societal benefit that our country cannot afford. Without a government backed bailout after the Hurricane Katrina disaster of over $18 billion dollars the NFIP would have collapsed. As the program becomes more financially sound it should be able to better withstand future catastrophes and support an action plan to repay the debt to the US government.

Perhaps one of the most profound changes is an amendment introduced by Senator Roger Wicker (R – Mississippi) that uses data from the National Oceanic and Atmospheric Administration (NOAA) and FEMA to assess the cause of water damage following a hurricane. The point of this amendment helps determine water and wind damage faster and with greater accuracy. If you recall post Katrina it was the courts that were left to determine if a loss was due to flooding or wind driven rain. Now, dwellings that are damaged directly by wind driven rain can be routed to their homeowner insurance carrier and a faster claims response.

The Biggert-Waters Flood Insurance Reform ACT doesn’t resolve all of the NFIP issues for long term sustainability. However, with the caustic political environment in Washington it is refreshing to see a bipartisan effort to strengthen this very important federal insurance plan.

Friday, August 10, 2012

Protect Yourself From ID Theft

I just spoke to a friend of mine that has discovered someone on the East Coast is using her identification and has used credit in her name. ID Theft is exploding throughout the country and the losses hurt in more than just a financial sense. Most states in this country are credit states which means they use your credit score to determine your cost for insurance, interest rates you pay on a loan or your ability to get credit. So, even though you are not at fault, you can prove that you are not at fault and the source of the complaint acknowledges that you are not at fault it can still affect your credit score.

To get an idea how big a problem this has become, over 10 million people in the United States discovered that they were victims of identity theft last year. ID Theft is used in financial fraud to steal from your bank accounts, your credit cards, your social security payment, your IRS tax refund and more. ID Theft is used in criminal activity to use your identity to commit a crime, enter another country, get special permits or commit acts of terrorism.

You can limit your risk of Id Theft by through prevention:
1.            Be extremely protective of your PIN number when you are using an ATM
2.            Change your passwords frequently and don’t use the same password for all of your accounts
3.            Shred credit card receipts. Don’t just tear them up, buy an inexpensive shredder and shred the  documents.               
4.            Don’t leave your mail in your mail box for extended periods of time. If your mail box is unsecure consider getting a post office box or a mail box with a clocking container.
5.            Know who you are giving your credit card information to
6.            Run your free credit report each year and review to make certain that all of the records reported are yours.
7.            Review your credit card statements and note any suspicious charges. Do the same thing with your bank statements.
8.            If you lose a credit card report it as stolen immediately.

If you discover that you are the victim of ID Theft here are some steps that you can take to prevent the loss from costing you money and damaging your credit.

1.            Keep a complete record of how you discovered the theft and the steps that you took.
2.            If the theft was more than a $1,000 report it to the local police. You will need a police report when working to get your money back and limit your liability.
3.            Report your theft to the Federal Trade Commission at  
4.            Order a credit report immediately and check your credit:       
5.            Contract each of the three credit reporting agencies to report the theft:

Trans Union       Report fraud      800-680-728
Order copy of report:     P.O. Box 390       Springfield, PA 19064      Or call: 800-916-8800
Dispute information in report:
Call number provided on credit report or use "investigation request form" provided by TransUnion when you order your report.
Opt out of pre-approved offers of credit and marketing lists:      800-680-7293
Equifax:              Report fraud     800-525-6285
Order copy of report: P.O. Box 740241, Atlanta, GA 30374-0241 Or call: 800-685-1111
Dispute information in report: P.O. Box 740256, Atlanta, GA 30374-0256 Or call the phone number provided in your credit report
Opt out of pre-approved offers of credit: 800-219-1251 (California only) Or write: Equifax Options, P.O. Box 740123, Atlanta GA 30374-0123

Experian:             Report fraud:     888-397-3742

By mail: Experian National Consumer Assistance Center P.O. Box 9530    Allen, TX 75013

Order copy of report:     Experian National Consumer Assistance Center P.O. Box 2002    Allen, TX 75013  Or call: 888-397-3742
Dispute information in report: Contact Experian at address and phone number provided on your credit report
Opt out of pre-approved offers of credit:   Call 888-567-8688

6.            Place a security freeze on your credit file to prevent additional ID Theft

I hope that you don't need to go through this process as it is painful and time consuming. However, the odds are that you will experience ID Theft at least once and it is important to know what steps to take. There are a number of services that you can subscribe to help prevent ID theft and will help you get back on your feet if you should become a victim. Also, most homeowner's policies have some minimal coverage that can be added on to the policy. Talk to your agent to find the service and coverage that will work best for you.