Connect with us

Personal Finance

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

Published

on

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.

How floodplain buyouts work

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.

Continue Reading

Personal Finance

What student loan forgiveness opportunities still remain under Trump

Published

on

Halfpoint Images | Moment | Getty Images

Under the Biden administration, the U.S. Department of Education made regular announcements that it was forgiving student debt for thousands of people under various relief programs and repayment plans.

That’s changed under President Donald Trump.

In his first few months in office, Trump — who has long been critical of education debt cancellation — signed an executive order aimed at limiting eligibility for the popular Public Service Loan Forgiveness program, and his Education Department revised some student loan repayment plans to no longer conclude in debt erasure.

“You have the administration trying to limit PSLF credits, and clear attacks on the income-based repayment with forgiveness options,” said Malissa Giles, a consumer bankruptcy attorney in Virginia.

The White House did not respond to CNBC’s request for comment.

Here’s what to know about the current status of federal student loan forgiveness opportunities.

Forgiveness chances narrow on repayment plans

The Biden administration’s new student loan repayment plan, Saving on a Valuable Education, or SAVE, isn’t expected to survive under Trump, experts say. A U.S. appeals court already blocked the plan in February after a GOP-led challenge to the program.

SAVE came with two key provisions that lawsuits targeted: It had lower monthly payments than any other federal student loan repayment plan, and it led to quicker debt erasure for those with small balances.

“I personally think you will see SAVE dismantled through the courts or the administration,” Giles said.

But the Education Department under Trump is now arguing that the ruling by the 8th U.S. Circuit Court of Appeals required it to end the loan forgiveness under repayment plans beyond SAVE. As a result, the Pay As You Earn and Income-Contingent Repayment options no longer wipe debt away after a certain number of years.

More from Personal Finance:
Nearing retirement? These strategies can protect from tariff volatility
Experts see higher stagflation risks. Here’s what it means for your money
Should investors dump U.S. stocks for international equities? What experts think

There’s some good news: At least one repayment plan still leads to debt erasure, said higher education expert Mark Kantrowitz. That plan is called Income-Based Repayment.

If a borrower enrolled in ICR or PAYE eventually switches to IBR, their previous payments made under the other plans will count toward loan forgiveness under IBR, as long as they meet the IBR’s other requirements, Kantrowitz said. (Some borrowers may opt to take that strategy if they have a lower monthly bill under ICR or PAYE than they would on IBR.)

Public Service Loan Forgiveness remains

Despite Trump‘s executive order in March aimed at limiting eligibility for Public Service Loan Forgiveness, the program remains intact. Any changes to the program would likely take months or longer to materialize, and may even need congressional approval, experts say.

PSLF, which President George W. Bush signed into law in 2007, allows many not-for-profit and government employees to have their federal student loans canceled after 10 years of payments.

What’s more, any changes to PSLF can’t be retroactive, consumer advocates say. That means that if you are currently working for or previously worked for an organization that the Trump administration later excludes from the program, you’ll still get credit for that time — at least up until when the changes go into effect.

For now, the language in the president’s executive order was fairly vague. As a result, it remains unclear exactly which organizations will no longer be considered a qualifying employer under PSLF, experts said.

However, in his first few months in office, Trump has targeted immigrants, transgender and nonbinary people and those who work to increase diversity across the private and public sector. Many nonprofits work in these spaces, providing legal support or doing advocacy and education work.

For now, those pursuing PSLF should print out a copy of their payment history on StudentAid.gov or request one from their loan servicer. They should keep a record of the number of qualifying payments they’ve made so far, said Jessica Thompson, senior vice president of The Institute for College Access & Success.

“We urge borrowers to save all documentation of their payments, payment counts, and employer certifications to ensure they have any information that might be useful in the future,” Thompson said.

Other loan cancellation opportunities to consider

Federal student loan borrowers also remain entitled to a number of other student loan forgiveness opportunities.

The Teacher Loan Forgiveness program offers up to $17,500 in loan cancellation to those who’ve worked full time for “complete and consecutive academic years in a low-income school or educational service agency,” among other requirements, according to the Education Department.

(One thing to note: This program can’t be combined with PSLF, and so borrowers should decide which avenue makes the most sense for them.)

Student loan matching funds

In less common circumstances, you may be eligible for a full discharge of your federal student loans under Borrower Defense if your school closed while you were enrolled or if you were misled by your school or didn’t receive a quality education.

Borrowers may qualify for a Total and Permanent Disability discharge if they suffer from a mental or physical disability that is severe and permanent and prevents them from working. Proof of the disability can come from a doctor, the Social Security Administration or the Department of Veterans Affairs.

With the federal government rolling back student loan forgiveness measures, experts also recommend that borrowers explore the many state-level relief programs available. The Institute of Student Loan Advisors has a database of student loan forgiveness programs by state.

Don’t miss these insights from CNBC PRO

Continue Reading

Personal Finance

Many Americans are worried about running out of money in retirement

Published

on

M Swiet Productions | Getty Images

Many Americans are worried they’ll run out of money in retirement.

In fact, a new survey from Allianz Life finds that 64% Americans worry more about running out of money than they do about dying. Among the reasons cited for those fears include high inflation, Social Security benefits not providing enough support and high taxes.

The fear of running out of money was most prominent for Gen Xers who are approaching retirement. However, a majority of millennials and baby boomers also said they worry about their money lasting, according to the online survey of 1,000 individuals conducted between January and February.

Separately, a new Employee Benefit Research Institute report finds most retirees say they are living the lifestyle they envisioned and are able to spend money within reason. Yet more than half of those surveyed agreed at least somewhat that they spend less because of worries they will run out of money, according to the survey of more than 2,700 individuals conducted between January and February.

More from Personal Finance:
Nearing retirement? These strategies can protect from tariff volatility
Experts see higher stagflation risks. Here’s what it means for your money
Should investors dump U.S. stocks for international equities? What experts think

Meanwhile, a Northwestern Mutual survey reported that 51% of Americans think it’s “somewhat or very likely” they will outlive their savings. The survey polled 4,626 U.S. adults aged 18 and older in January.

Since those studies were conducted, new tariff policies have caused disturbance in the stock markets and prompted speculation that inflation may increase. Meanwhile, new leadership at the Social Security Administration has prompted fears about the continuity of benefits. Those headlines may negatively affect retirement confidence, experts say.

With employers now providing a 401(k) plan and other savings plans versus pensions, it is largely up to workers to manage how much they save heading into retirement and how much they spend once they reach that life stage. That responsibility can also lead to worries of running out of money in the future, experts say.

How to manage the ‘fear of outliving your resources’

Because of the unique risks every individual or couple faces when planning for retirement, the best approach is typically to transfer some of that burden to a third party, said David Blanchett, head of retirement research at PGIM DC Solutions.

Creating a guaranteed lifetime income stream that covers essential expenses can help reduce the financial impact of any events that require retirees to cut back on spending, Blanchett explained.

That should first start with delaying Social Security benefits, he said. While eligible retirees can claim benefits as early as 62, holding off up until age 70 can provide the biggest monthly benefits. Social Security is also unique in that it provides annual adjustments for inflation.

73% of Americans are financially stressed

Next, retirees may want to consider buying a lifetime income annuity that can help amplify the monthly income they can expect. Admittedly, those products can be complicated to understand. Therefore Blanchett recommends starting out by comparing very basic products like single premium immediate annuities that are easier to compare.

“Unless you do those things, you just can’t get rid of that fear of outliving your resources,” Blanchett said.

Without a guaranteed income stream, retirees bear all of the financial risk themselves, he said.

 “Retirement could last 10 years; it could last 40 years,” Blanchett said. “You just don’t know how long it’s going to be.”

Among retirees, there has been some hesitation to buy annuities, said Craig Copeland, EBRI’s director of wealth benefits research. Such a purchase requires parting with a lump sum of money in exchange for the promise of a guaranteed income stream.

“We see great increase in interest, but we aren’t seeing upticks in take up yet,” Copeland said. “I do think that’s going to start to change.”

What can help boost retirement confidence

To effectively plan for retirement, it helps to seek professional financial assistance, experts say.

Meanwhile, few people have a plan of their own for how they may live on the assets they’ve worked hard to accumulate, according to Kelly LaVigne, vice president of consumer insights at Allianz Life.

“This is something that you should not plan on doing on your own,” LaVigne said.

While the survey from Northwestern Mutual separately found individuals think they need $1.26 million to retire comfortably, the real number individuals need is based on their personal situation, said Kyle Menke, founder and wealth management advisor at Menke Financial, a Northwestern Mutual company.

In thinking about how life will look in 30 years, there are a variety of things to consider, Menke said. This includes stock market returns, taxes, inflation and medical expenses, he said.

Even people who have enough money for retirement often don’t feel confident in their ability to manage all of those factors on their own, he said. Financial advisors have the ability to run different simulations and stress test a plan, which can help give retirees and aspiring retirees the confidence they’re lacking.

“I think that’s where the biggest gap is,” said Menke, referring to the confidence Americans are lacking without a plan.

Continue Reading

Personal Finance

Trump tariffs will hurt lower income Americans more than the rich: study

Published

on

Shipping containers at the Port of Seattle on April 16, 2025.

David Ryder/Bloomberg via Getty Images

Tariffs levied by President Donald Trump during his second term would hurt the poorest U.S. households more than the richest over the short term, according to a new analysis.

Tariffs are a tax that importers pay on foreign goods. Economists expect consumers to shoulder at least some of that tax burden in the form of higher prices, depending on how businesses pass along the costs.

In 2026, taxes for the poorest 20% of households would rise about four times more than those in the top 1%, if the current tariff policies were to stay in place. Those were findings according to an analysis published Wednesday by the Institute on Taxation and Economic Policy.

Car prices are going up from Trump's auto tariffs 'unless something changes': Liberty Subaru owner

For the bottom 20% of households — who will have incomes of less than $29,000 in 2026 — the tariffs will impose a tax increase equal to 6.2% of their income that year, on average, according to ITEP’s analysis.

Meanwhile, those in the top 1%, with an income of more than $915,000 a year, would see their taxes rise 1.7% relative to their income, on average, ITEP found.

Economists analyze the financial impact of policy relative to household income because it illustrates how their disposable income — and quality of life — are impacted.

Taxes by ‘another name’

“Tariffs are just taxes on Americans by another name,” researchers at the Heritage Foundation, a conservative think tank, wrote in 2017, during Trump’s first term.

“[They] raise the price of food and clothing, which make up a larger share of a low-income household’s budget,” they wrote, adding: “In fact, cutting tariffs could be the biggest tax cut low-income families will ever see.”

Meanwhile, there’s already evidence that some retailers are raising costs.

A recent analysis by the Yale Budget Lab also found that Trump tariffs are a “regressive” policy, meaning they hurt those at the bottom more than the top.  

More from Personal Finance:
Consumers are spending as trade wars raise recession odds
Consumers make financial changes in response to tariffs
Can tariff revenue replace income tax?

The short-term tax burden of tariffs is about 2.5 times greater for those at the bottom, the Yale analysis found. It examined tariffs and retaliatory trade measures through April 15.

“Lower income consumers are going to get pinched more by tariffs,” said Ernie Tedeschi, director of economics at the Yale Budget Lab and former chief economist at the White House Council of Economic Advisers during the Biden administration.

Treasury Secretary Scott Bessent has said tariffs may lead to a “one-time price adjustment” for consumers. But he also coupled trade policy as part of a broader White House economic agenda that includes a forthcoming legislative package of tax cuts.

“We’re also working on the tax bill and for working Americans, I believe that the reduction in taxes is going to be substantially more,” Bessent said April 2.

It’s also unclear how current tariff policy might change. The White House has signaled trade deals with certain nations and exemptions for certain products may be in the offing.

Trump has imposed a 10% tariff on imports from most U.S. trading partners. Mexico and Canada face 25% levies on a tranche of goods, and many Chinese goods face import duties of 145%. Specific products also face tariffs, like a 25% duty on aluminum, steel and automobiles.

Continue Reading

Trending