It’s been a bad week for Wells Fargo. First, CEO John Stumpf was on Capitol Hill to take a beating over the company’s practice of opening up phantom accounts.
Now the embattled bank’s latest transgression involves a report that it stuck a New Jersey homeowner with a mammoth flood insurance premium hike—without him asking for more coverage—and then giving the guy the runaround when he wanted the situation rectified.
Flood insurance at center of snafu
According to a report in the Asbury Park Press, homeowner Steven Schrenk was shocked when his Wells Fargo mortgage payment took a surprise hike.
Unbeknownst to him, the increase was because Wells Fargo needed to replenish his escrow after it had been drained to cover a premium hike in flood insurance for additional coverage that Steven didn’t want.
Wells Fargo was supposed to default Steven into the same level of flood insurance coverage he had elected back in 2004—$149,000 for the house and $56,000 for contents.
But instead, the bank went ahead and opted him into the highest level of coverage—$250,000 for the house and its contents for $100,000. That raised his insurance premium from $3,612 to $7,313, a far cry from the $4,424 it should have been raised to.
Steven says his home doesn’t appraise for anywhere near $250K. ‘[Steven] said he previously had a gap policy as his mortgage balance was about $17,000 higher than his flood coverage,’ the newspaper reports.
Ultimately, Wells Fargo and the third-party insurer who wrote the flood coverage made everything right and reduced the coverage to Steven’s satisfaction. But that was only after numerous phone calls—including one Steven had to place to a local consumer expert on staff at the newspaper to bring light to what was happening!
What you need to know about flood insurance
If you’re like most homeowners, you probably wonder if you really need flood insurance.
In fact, only 14% of homeowners across the country say they have a flood insurance policy, according to a recent survey from the Insurance Information Institute (III).
That’s not good when you consider floods are the number one natural disaster in the United States, according to FloodSmart.gov.
Here’s a list of the most common excuses for not having flood insurance…
‘I don’t know how to get coverage’
You get flood coverage through the National Flood Insurance Program (NFIP) and also a few private insurers.
‘I can’t afford it’
Premiums will be higher if you live in a coastal community — no doubt about it. Yet the average federal flood insurance premium is somewhere around $650 to $750 annually, says the NFIP. That’s for a policy covering damage up to $250,000.
‘I’m already covered through my other insurance’
Now, what will protect you in the event of flooding is an auto insurance policy with comprehensive coverage, according to the III. But because comprehensive coverage is not mandatory, not everyone has it.
So here’s a word to the wise: If you do have a comp policy, double-check with your auto insurer to make sure damage from flooding is covered.
‘I don’t live in a flood plain’
Don’t fall into the trap of using this as a justification to not have flood insurance! The NFIP reports that some 20% of total flood claims paid are from properties outside flood high-risk areas.
‘Insurance is optional for me because I own my home outright’
Many people who own homes do so mortgage-debt free. So insurance is optional for them. Yet even if you live in a low-lying area that historically hasn’t flooded, it’s still a good idea to buy a flood policy.
Christa of our team had a terrible experience with flooding. She had to have her house rebuilt, basically from scratch, and she had it raised nine feet off the ground by putting the structure on pillars!
‘I’ll just wait until a big storm looms to get the coverage’
This is one case where if you snooze, you lose! Coverage typically doesn’t become effective until 30 days after the date you purchase the policy. If you wait for a Superstorm Sandy or a Hurricane Katrina to be on your doorstep, it’s already too late.