Addendum H Adds Flood Insurance Peace of Mind

ORLANDO, Fla. – Unfortunately, flooding is part of life. Some insurance executives have a saying: If it rains somewhere, then it can flood. This is particularly true in Florida, due to the state’s frequent exposure to tropical weather systems.

Because a flood’s destruction has a profound effect on Florida real estate values, the Florida Legislature recently passed a statute requiring home sellers to disclose a history of flooding on the property.  Section 689.302 of the Florida Statutes requires a seller to complete and provide a flood disclosure to a prospective purchaser of residential property at or before the time the contract is executed.  The disclosure must take the form set forth in the statute and requires the seller to disclose whether they have any knowledge of flooding on the property. The seller must also disclose whether they have received any insurance or other financial assistance to repair flood damage. Florida Realtors® currently offers the flood disclosure on Form Simplicity in form FD-2, which must be used in every residential transaction.

But did you know there is another form that can help protect a buyer who may be interested in a property prone to flooding or other storm damage?

The form even allows a buyer to terminate a deal if they can’t obtain standard homeowner’s insurance at a reasonable price. Let’s look at addendum H – Homeowner’s/Flood Insurance.

The first thing you’ll notice is that there are two checkboxes — one for flood insurance and one for homeowner’s insurance generally. These are not either/or checkboxes. A buyer may select one or both. 

The first check box deals with general homeowner’s insurance.  If a buyer is concerned they may not be able to find insurance at a price they can afford, they can check this box. The buyer can fill in the blanks in this first section with the maximum amount they can afford for insurance. The section also allows the buyer to set a deadline by which they would need confirmation such insurance is available, though it includes a default of 30 days after the Effective Date or 10 days prior to Closing Date if another date isn’t chosen.  If the buyer is unable to obtain insurance at that price by the deadline, they would be able to terminate the contract without penalty.

The second check box adds the additional protection for a buyer who needs flood insurance, which is not typically included in standard homeowner’s coverage.  Paragraph 10(d) of the FR/Bar and FR/Bar-ASIS contracts already permits a buyer to terminate the contract if they are unable to obtain flood insurance at all.  The second section of addendum H permits the buyer to terminate if they feel the flood insurance they can obtain is unaffordable.  As with the first section of addendum H, the buyer can set a maximum premium for the insurance and can set a deadline before which they can terminate the contract without penalty.

As insurance premiums rise throughout the state, it can be a challenge to convince a buyer that insurance can be affordable for the property in which they are interested.  Using addendum H can give the buyer additional peace of mind by allowing them to set the maximum premium they are willing to pay. 

Richard Swank is an Associate General Counsel for Florida Realtors

Note: Information deemed accurate on date of publication

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