If you’re considering buying a particular house, it’s standard procedure to have the home inspected prior to closing to assess the condition of the structure and systems – items like the foundation, roof and heating/air conditioning – as well as to identify any repairs that may be needed. While inspections are a vital part of the home-buying process, they won’t reveal whether the home is in an area prone to extreme weather conditions, or if it has a history of insurance claims. To find that information – and either take a pass on the property or adequately insure it based on what you find – you’ll have to do a bit of homework first. Here’s how industry insiders make sure they’re picking a good investment.
Search the FEMA Flood Insurance Map
Damage from flooding should be one of the biggest concerns for any homeowner, and standard homeowners insurance policies typically don’t cover these losses. Fortunately, it’s possible to check if the property lies within a flood zone: The Federal Emergency Management Agency (FEMA) website allows you to search flood maps by address, place or coordinates. Once you enter your search criteria, click on the “VIEW MAP” icon to take a closer look at the flood map. Be forewarned: This is not a quick and easy process, and you should plan on spending some time reviewing and analyzing the map. If you need help in deciphering it, check out FEMA’s tutorial on how to read Flood Insurance Rate Maps (FIRMs).
In some flood-prone areas, your lender will require you to buy flood insurance. Even if the lender doesn’t, it’s a good idea to at least consider adding this type of coverage to your home policy to ensure you’re protected. While the FEMA maps are a good starting point to assess a property’s potential for flood-related damage, they are based on historical activity and can’t account for unexpected disasters and ever-evolving weather patterns (including those related to climate change). Keep in mind that flooding is not limited to coastal areas or regions directly adjacent to major rivers. Flooding can happen where floods never happened.
Check with City Officials
It’s also a good idea to touch base with officials from the local town or city government. They can go over any regulations you should know about – including what you’ll need to do to bring the property up to code should you ever decide to renovate. It’s not unheard of for a fairly insignificant home project to turn into a massive (and expensive) one once local housing-code issues come into play.
Investigate Past Events
While most people are familiar with credit reports – detailed reports of an individual’s credit history – most are unaware that there are reports that track a home’s history, at least where insurance claims are concerned. There are two widely used reports that track this information: One is the C.L.U.E. report (for Comprehensive Loss Underwriting Exchange), which provides a seven-year history of losses on the property, including (for each loss) the date of loss, loss type and amount paid (a similar report is also available for automobiles). The other report is called A-PLUS (for Automated Property Loss Underwriting System). Both are used by insurance companies to assess their risk in selling a policy.
Homeowners can also use the report to find out if any claims have been made in the past, and help determine a particular home’s insurance risk. Both reports are available to consumers for free from the respective agencies (thanks to the Fair and Accurate Credit Transactions Act). However, it’s not your house yet, you may have to ask the current homeowner or an insurance agent to order a copy for you. If they’re reluctant to do so, that’s information to research further.
One more website to check out is homedisclosure.com, which provides free reports on weather and environmental risk (including radon exposure and sinkhole, landslide and wildfire risk), plus information on demographics and crime in the area. Enter the property’s address – and sign in using Facebook or your name and email address – to view the report.