Disaster-proof your home cost-effectively

By Holden Lewis, Bankrate.com
Nov. 5, 2004

NORTH PALM BEACH, Fla. (Bankrate.com) -- You can't avoid natural disasters. They choose where to hit, and you don't have any say in the matter.

Almost the entire country is vulnerable to some type of natural disaster -- tropical storms on the Atlantic and Gulf coasts, wildfires and earthquakes on the West coast, hail and tornadoes in a wide swath of the nation's middle, flooding in the lowlands and landslides in the hills.

You can blunt the brunt of Mother Nature by securing your property against her wrath. Some disaster-proofing projects are cheap and easy; others are expensive and complex. Should you tackle costly projects? Figuring out what's affordable and cost-effective requires sleuthing, some math and a dose of soul searching.

Questions to ask

The financial stakes are high because homeowners generally have to pay out of pocket, borrow from their homes' equity or turn to credit cards to pay for safety improvements. Government aid, in the rare places where it exists (chiefly, earthquake country) is often indirect -- waived permit fees, rebates on property taxes.

When you're deciding whether to spend the money to retrofit your home to weather a disaster, here are some questions to ask:

Will my insurance premiums be reduced?
Will the upgrade increase the value of my home?
How much am I willing to pay for peace of mind before a disaster, and for convenience afterward?
You can get a definite answer to the first question, and you have to rely on estimates for the second and gut instincts for the third.

Would hurricane shutters (or hail-resistant roof shingles, or an earthquake retrofit or wildfire-resistant landscaping) reduce insurance bills? Ask your insurance company.

The answers might not be as straightforward as you would hope.

Take hurricane shutters, for example. In hurricane-prone places, windstorm insurance is a separate policy, on top of the regular homeowners insurance. (The same goes for insurance against earthquakes and floods from rising water.) By installing hurricane shutters, you might secure a discount on the windstorm policy, but not on the regular homeowners insurance policy.

That's how it works in Florida, where four hurricanes raked the state in August and September. The jaw-dropping series of windstorms provoked a lot of inquiries with insurance companies from homeowners who suddenly saw the benefit of having hurricane shutters.

Big insurance savings

"Some of the breaks can be fairly substantial in terms of discounts on your windstorm premiums here in Florida," says Ryan Priest, a spokesman for Allstate Floridian. The company offers discounts of 5 percent to 42 percent off windstorm coverage, depending on everything from what type of shutters are used, whether glass-block windows and skylights are protected, which design code the house was built under and even what type of roof is on the house. (Hip roofs are preferred over gable roofs.)

In other words, it's complicated, and when you talk to the insurance agent and any contractors you have to be thorough and specific about the materials to be used and work that you want done.

Once the project is complete, you might have to show the insurance agent receipts, a certificate of occupancy (to show whether it was built under newer, stricter design codes), and photos. You might have to hire an independent inspector to certify, for example, that you have a metal roof deck.

It pays to shop around. Some insurance discounts are mandated by law and others are company incentives.

Some projects pay for themselves quickly. Kevin Simmons, an associate professor of economics at Austin College in Sherman, Texas, studies the costs and benefits of disaster mitigation. He also lives in a town where damaging hailstorms are frequent unwanted visitors.

When he bought his house, the roof was hail-damaged. Instead of reroofing with regular shingles, he shelled out about $1,500 more for flexible hail-resistant shingles. He says his insurance company reduced the premium by $500 a year. "That's a no-brainer," Simmons says -- the more-expensive shingles paid for themselves in three years.

Judging cost-effectiveness

That's rare. Some expensive projects have no chance of paying for themselves in the time that the homeowner intends to live in the house. It's worthwhile to ask whether such upgrades increase the value of the house, and if so, by how much.

Simmons tackled one such question a few years ago on behalf of a town on a barrier island on Florida's Gulf coast. (His clients asked him not to identify the town.) He and his associates researched sales records to determine whether having built-in metal storm shutters increased a home's value. Fewer than 30 percent of homes in the town had shutters.

"We found that homes with storm shutters sold at a premium of about 5 or 6 percent," Simmons says.

That was on the barrier island, though. A short distance away, on the mainland, homes with shutters didn't sell for a significant premium. Buyers perceive, Simmons says, houses on barrier islands are more vulnerable than houses on the mainland.

The most cost-effective home improvements -- in terms of raising a home's value -- are those that make the house look better. Most disaster-retrofitting projects, such as bolting a wood-frame house to its foundation to resist earthquakes, or installing brackets to hold storm shutters, are invisible, ugly or, at best, utilitarian looking. Don't expect to recoup the cost of a disaster-mitigation project when you sell the house.

Get objective, experienced advice

A real estate agent with years of experience selling houses in your neighborhood can offer an opinion about the effects of disaster retrofitting on resale price. Or hire a property appraiser to make an estimate. Ask a seasoned professional who knows your neighborhood well. Don't seek the contractor's opinion about the effect of his work on your home's value. That's like asking a barber if you need a haircut.

Even if a project doesn't pay for itself in lower insurance bills and increased resale value, it might be worthwhile if the upgrade makes you feel better. It feels satisfying to know that your shutters and roof can handle a strong hurricane; that the water heater is strapped to the wall studs so an earthquake won't rip it from the pipes, flooding the house with water and natural gas; that you have wildfire-resistant landscaping and soffits and eaves.

On the other side of a disaster, there's no feeling of misery like being displaced from your place of comfort. It's depressing to have to move out of your home while it's getting rebuilt, or to have to live in disarray while repairs are being made. No one can set a price on that but you and your family.

 

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