Personal Finance

Flood insurance likely doesn’t cover storm damage in your basement

Published

5 months ago

August 9, 2024

Business Finance News

A flooded street caused by the rain and storm surge from Hurricane Debby on Aug. 05, 2024, in Cedar Key, Florida.

Joe Raedle | Getty Images

You need a separate insurance policy for floods

A house is surrounded by floodwaters from Tropical Storm Debby on Aug. 6, 2024 in Charleston, South Carolina.

Miguel J. Rodríguez Carrillo | Getty Images

Flooding causes 90% of annual disaster damage in the U.S., according to the Federal Emergency Management Agency.

Just an inch of water can cause roughly $25,000 of damage to a property, the agency said.

Homeowners and renters insurance policies do not cover flood damage, however.

Consumers need separate insurance to cover physical damage caused by a flood, which is defined as water entering a home from the ground up. That may occur due to storm surge, heavy rainfall or an overflowed body of water like a lake or river.

Most people who have flood insurance get it through the federal government, via FEMA’s National Flood Insurance Program, experts said.

Americans had about 4.4 million residential NFIP policies at the end of 2023, according to FEMA. They had total coverage of $1.2 trillion.

Many homeowners go without coverage, though. On average, about 30% of U.S. homes in the highest-risk areas for flooding have flood insurance, according to the University of Pennsylvania’s Wharton Risk Center.

Nearly 21,000 policyholders filed a claim in 2023, with an average payment of almost $46,000, according to FEMA data.

The average annual flood insurance premium was $700 in 2019, FEMA said.

Private insurers also offer flood policies and may offer higher coverage than FEMA’s policies, according to the Insurance Information Institute.

What items aren’t covered in a basement?

A Johnson, Vermont, resident removes items destroyed in flooding of a finished basement in 2023.

Jessica Rinaldi/The Boston Globe via Getty Images

American basements can be a hodgepodge of personal property, leveraged as storage units, man caves, game rooms, wine cellars, home bars and secondary living rooms.

But basement coverage “is limited” through NFIP policies, FEMA said.

The agency defines a “basement” as any area of a building with a floor below ground level on all sides.

Even rooms that aren’t fully below ground level — like sunken living rooms, crawlspaces and lower levels of split-level buildings — may still be considered basements, the agency said.

Its flood policies exclude the following items from coverage in a basement:

“Personal property” like couches, computers, or televisions
Basement improvements (such as finished flooring, finished walls, bathroom fixtures, and other built-ins)
Generators (and similar items)
Certain dehumidifiers

Items “stored in a basement, meaning they are not connected to a power source,” aren’t covered, FEMA said.

Consumers concerned about flood risk and insurance coverage should consider removing their stuff from a basement, if possible, Kochenburger said. They should “move it to a storage unit or somewhere else” on higher ground, he said.

These basement items are included, with an add-on

A man uses a mop to wipe up rain water on the interior of the Lincoln Memorial on Aug. 09, 2024 in Washington, DC. The Washington DC area experienced a tornado warning and flooding as a result of remnants from Debby.

Anna Moneymaker | Getty Images

The following basement items are covered, but only if NFIP policyholders buy additional “contents coverage,” which is optional, and if connected to a power source, FEMA said:

Clothes washers and dryers
Air conditioners (portable or window units)
Food freezers and the food in them (excluding walk-in freezers)

Private insurance policies may offer broader property coverage in basements, depending on the insurer, Don Griffin, vice president of policy and research at the American Property Casualty Insurance Association, previously told CNBC.

You can put anything you want in your basement, but don’t expect it to be insured for floods.

Peter Kochenburger

visiting law professor at Southern University Law Center

One silver lining to all this: Fewer U.S. homes are being built with basements.

The share of new single-family homes with full or partial basements has fallen by more than half since the mid-1970s, from 45% to 21%, according to U.S. Census Bureau data as of 2022.

On Feb. 6, FEMA announced a proposal to update its NFIP program and potentially enhance basement coverage for policyholders.

“Policyholders with basements continue to be surprised that under the current Dwelling Form, the policy provides limited coverage in a basement,” FEMA wrote.

What basement items are covered by flood insurance?

“Flood insurance’s primary focus is structure: the building itself,” Kochenburger said.

Here are examples of how NFIP policies cover the building and structure in basements, FEMA said:

Central air conditioners
Fuel tanks and the fuel in them
Furnaces and water heaters
Sump pumps, heat pumps, and well water tanks and pumps
Electrical outlets and switches
Elevators and dumbwaiters
Certain drywall
Electrical junction and circuit breaker boxes
Stairways and staircases attached to the building
Foundation elements and anchorage systems required to support a building

The hidden reason some U.S. homes are losing value

Policyholders can also get compensation for cleanup costs such as pumping out trapped floodwater, treatment for mold and mildew and structural drying of the interior foundation, FEMA said.

As a precaution, the agency recommends documenting the manufacturer, model, serial number and capacity of equipment in your basement like furnaces, central AC units and appliances like freezers, washers and dryers.

Should you experience flooding, the NFIP requires this information during the claims process, FEMA said.

Policyholders should review their flood insurance policy for a comprehensive list of covered items and expenses, according to FEMA.

Personal Finance

Here are steps you can take to avoid overspending next holiday season

Published

23 hours ago

December 31, 2024

Business Finance News

Ezra Bailey | Stone | Getty Images

Opening presents during the holidays is of course a lot of fun. But for many, opening those credit card statements will be just the opposite.

Months before the holidays hit, consumers were already bracing for the anticipated costs.

More than half of 2024 holiday shoppers, or 55%, felt stress at the costs associated with the season, according to a survey conducted online in September by The Harris Poll on behalf of NerdWallet.

Still, 32% of consumers thought it was important to purchase holiday gifts and experiences to show their love for family and friends, despite the expenses, the survey found.

“The holidays are hyped 24/7 for weeks before the actual days,” said Carrie Rattle, a financial therapist in New York. “This builds a level of almost manic euphoria and gives us permission to ignore a spending plan, achieve instant gratification and worry about the aftershocks later.”

Those aftershocks are likely being felt right around now.

To that point, 10% of holiday shoppers this year were considering tapping their emergency savings for gifts, according to NerdWallet. Meanwhile, 9% said they’d prioritize their gift purchases over debt payments or other bills. (Some 2,000 adults ages 18 and older were polled.)

To avoid overspending during the holidays, people need to plan ahead and create a spending budget, experts say. There are steps you can take now to avoid a repeat next year.

Plan ahead and ‘bookend your shopping time’

It’s best to start thinking about big purchases, such as for the holidays, “when you are calm and rational,” Rattle said. That will likely be far in advance of when those events take place.

“Before the tide of emotional shopping overtakes you, know what you want to spend,” Rattle said.

This way, you can also take your time deciding what gifts you want to get people and to research the costs.

It can be a good idea to save throughout the year for the holidays, said Kristen Euretig, a certified financial planner and founder of Brooklyn Plans.

“You can simply set aside a monthly amount to a dedicated savings account and reserve it for holiday expenses,” Euretig said.

Starting early will also allow you to take advantage of different sales that pop up throughout the year, Euretig added.

Rattle recommends people make a list of the gifts they want to buy far in advance, and then space out their purchases to avoid breaking your budget.

“Buy once a week,” she said. “Bookend your shopping time by having an obligation before shopping, and right after your targeted completion time.”

“When you control your purchasing time you also control browsing,” Rattle added.

You can also be on the lookout for which of the gifts you bought people were actually put to use, she said.

“Reflecting on this helps you realistically separate what is truly valued by the receiver,” Rattle added.

Don’t miss these insights from CNBC PRO

Personal Finance

5 advisors offer important tips for managing your money in 2025

Published

24 hours ago

December 31, 2024

Business Finance News

Personal finances are top of mind for many households as they get set to ring in the new year.

About 38% of Americans ranked financial stability as their No. 1 focus area for 2025, according to a recent Allianz Life survey.

CNBC reached out to certified financial planners on its Financial Advisor Council to list their top resolutions for households as they look ahead to the coming year.

Here’s the financial advice they offered.

Kamila Elliott, Co-founder and CEO of Collective Wealth Partners

Kamila Elliott, CFP, is co-founder and CEO of Collective Wealth Partners in Atlanta.

Kamila Elliott

Create and stick to your budget! Max out on retirement contributions and create one personal financial goal such as paying off credit cards or investing an additional $100 a month in an investment account.

Barry Glassman, Founder and president of Glassman Wealth Services

It starts and ends with knowing where the money is going. I encourage people to track their spending for a period of time, maybe going back to three months’ worth of credit card and Apple Pay payments. It’s incredible what behaviors will change once people just know the truth.

Marguerita Cheng, CEO of Blue Ocean Global Wealth

Courtesy Marguerita Cheng

I’m going to say estate planning. It’s important for everyone to address — even for an 18-year-old heading off to college in Fall 2025. I had my daughter complete a health care and financial power of attorney before I sent her off to college.

If people feel overwhelmed with the estate planning process, I remind people that it’s a process. Start with a financial and health care power of attorney.

You can then focus on beneficiary designations. Next, a will and trust, if the trust is appropriate for your situation. This process also helps individuals track down retirement plans from former employers. Estate planning is a wonderful opportunity to revisit life insurance as well.

Lee Baker, founder, owner and president of Claris Financial Advisors

1. It’s not a popular subject but take the time review all your insurance coverages:

Auto and home in particular have jumped significantly for many people. Don’t forget about disability and life insurance. As long as you can get up and earn a living, you can replace your car or rebuild your home. What happens if you can’t generate an income?

Why so many young adults are still living with their parents

2. Spend some time reviewing your tax strategies and retirement planning:

Required minimum distributions: Do you ‘need’ them? Would making Qualified Charitable Distributions improve your overall picture?
Tax loss harvesting: Here’s an opportunity to improve your overall portfolio performance.
Employee benefits: Are you fully taking advantage of a health savings account (if available) and retirement plan contributions?

3. Review your cash flow:

If you spent more than you should have over the holidays, now is a good time to make a plan to get rid of that financial hangover as well as making a plan to avoid it next year. Take a look at your personal interest rate environment. We have gotten a few rate cuts from the Federal Reserve so far. There may be more but either way take stock of your situation.

Cathy Curtis, founder and CEO of Curtis Financial Planning

1. Automate savings:

One of the best features of company retirement plans such as 401(k) plans and 403(b) plans is that the contribution amounts are automatically taken out of a person’s paycheck each month, and then the funds are automatically invested in a pre-selected selection of funds.

Since it’s important to save outside of retirement as well for other goals, setting up an automatic withdrawal from a checking account to a savings or investment account is a smart move. First step is to determine how much to save each money based on cash flow and then set up a monthly or quarterly transfer. Once it is set up, it is out of sight and out of mind and the savings will grow.

It starts and ends with knowing where the money is going … It’s incredible what behaviors will change once people just know the truth.

Barry Glassman

Founder and president of Glassman Wealth Services

2. Manage overspending:

In order to get a handle on overspending, the first step is to identify the spending weaknesses. It could be household furnishings, electronic equipment, clothing, travel, or jewelry, etc. Then, write down how much was spent in the problem category. A good way to find the numbers is to look at the year-end credit card statements. Then, write down a number that is 20-30% below the amount spent in 2024 and make that a new budget and target for 2025. Track spending each month on a spreadsheet or app to keep the spending goal top of mind.

3. Stay invested no matter the headline news:

If the end of 2024 is any indication, 2025 is likely to be a turbulent year in the stock market. With a new presidential administration coming in, global wars, inflation and uncertainty around the projection of interest rates, that is much to worry about. But decades of history show us that the market will go up over longer periods and the smartest move a long-term investor can make is to keep investing and stay invested.

Personal Finance

As ETF assets top $10 trillion for first time, here are trends to watch

Published

2 days ago

December 30, 2024

Business Finance News

Pedestrians walk in front of the New York Stock Exchange, decorated with a giant U.S. flag, in New York City, Nov. 6, 2024.

China News Service | China News Service | Getty Images

Assets in U.S. exchange-traded funds in November topped $10 trillion for the first time, according to the latest data from Cerulli Associates.

ETFs — funds that invest in stocks, bonds or other assets and trade on national stock exchanges — reached $156 billion in flows for November, surpassing previous monthly flow records.

The activity is “on par with elevated activity typically seen toward the end of the year,” Cerulli reported.

Research from Morningstar pointed to a “Trump bump” that helped U.S. funds — including both ETFs and mutual funds — take in $115 billion in November, the highest total since April 2021.

As 2024 comes to a close, these are a few of the ETF trends that dominated the year, based on the latest data.

S&P 500 among 2024 fund winners

Year to date, the S&P 500 index is up almost 24%, as of Monday.

The S&P 500 rally, buoyed by the Magnificent Seven stocks — Apple, Microsoft, Google parent Alphabet, Amazon.com, Nvidia, Meta Platforms and Tesla — helped account for about half of the index’s gains for the year, according to data and analytics company VettaFi.

Four of the top 10 ETFs for 2024 by flows track the S&P 500 index, according to Cerulli.

The Vanguard 500 Index Fund ranks No. 1 for 2024 year-to-date inflows, according to Cerulli, followed by iShares Core S&P 500 ETF, iShares Bitcoin Trust, Invesco QQQ Trust, Vanguard Total Stock Market Index Fund, iShares Core US Aggregate Bond ETF, SPDR Portfolio S&P 500 ETF, Vanguard Total Bond Market Index Fund, Invesco S&P 500 Equal Weight ETF and Vanguard Growth Index Fund.

Malcolm Ethridge, a certified financial planner and founder and managing partner at Capital Area Planning Group, said he often uses S&P 500 ETFs in client portfolios because they allow for access to company names that would be in any large-cap growth strategy for significantly reduced costs.

While an actively managed fund may charge 50 or 75 basis points, a passive S&P 500 ETF may only charge 10 basis points, he said.

The S&P 500 index, which has had a record run, may be poised to continue to do well as the index rebalances to reflect current market leaders.

“I think this is a case where SPY [SPDR S&P 500 ETF Trust] probably outperforms the majority of fund managers in 2025,” Ethridge said.

S&P 500 could get close to 7,000 in the first half of next year, says Fundstrat's Tom Lee

Alternative ETFs see record growth

Meanwhile, alternative ETFs in November crossed $400 billion in net assets for the first time, according to Cerulli.

Moreover, the year-over-year asset growth rate for alternative ETFs — at 93% — was highest among all asset classes.

Most of the total alternative ETF market share — 80%, or around $325 billion — comprises digital assets, trading-leveraged equity and derivative income ETFs, according to Cerulli.

Financial advisors reported having just a 3.6% allocation to alternatives in 2024, though that is expected to increase, according to Cerulli. Within existing alternatives allocations, 14.4% is done through the use of ETFs, the firm found.

Crypto ETFs are ‘here to stay’

In January, bitcoin ETFs began trading on U.S. exchanges.

Now, spot bitcoin ETFs hold more digital currency than bitcoin founder Satoshi Nakamoto, VettaFi noted. Despite a “more lackluster” rollout for spot ethereum ETFs this year, crypto ETFs are “here to stay,” according to VettaFi.

The top five new ETFs by assets in 2024 are all bitcoin ETFs, according to Cerulli, based on data through November.

They include iShares Bitcoin Trust ETF at No. 1, followed by Fidelity Wise Origin Bitcoin ETF, ARK 21 Shares Bitcoin ETF, Bitwise Bitcoin ETF, and Grayscale Bitcoin Mini Trust ETF.