What to Do About Flood Insurance

Due to the signing of the “Homeowner Flood Insurance Affordability Act” on March 21, 2014, some of the content of this blogpost has changed. Please refer to my post “Flood Insurance Update

DISCLAIMER: I am certainly not an expert or an insurance agent, but these are my personal take-a-ways from community meetings, handouts and online research. For specific information regarding your home, you should contact your insurance agent.  

This post was initially written for my neighborhood association, so there are specific references to my city and county, but the concepts still apply wherever you live.  

If you haven’t read it yet, please read The Bottom Line on Flood Insurance before continuing here.  

What many don’t understand is that the repercussions of the Biggert-Waters Act will affect everyone in some way. Those not in a flood zone today might be in one tomorrow if FEMA re-draws their FIRM map!  It doesn’t really matter if your home or neighborhood has ever flooded or not.  My neighborhood was built 40 years ago and has never, ever flooded, yet we will see our flood insurance rates rise.  

SO WHAT OTHER ACTIONS CAN YOU TAKE?  

(1) Write your representatives.  In addition to the US Senators, this needs to come to the attention of our US Congressmen, and our state representatives that can influence them, including the Governor.  Your Mayor should be advocating for you.  It is more effective to contact your representatives directly.     

(2) Tell your friends.  You may have many friends or acquaintances who live in flood zones.  They may not even know about this, or how it will affect them, and they need to write/email/call their representatives as well.  And not just my friends in St Petersburg!  Remember Pinellas County will be the most impacted county in the country.  No kidding.  Ahead of Lousiana!  This will affect your friends in flood zones around the state and the US.   

(3) Get an Elevation Certificate, if you don’t have one.  First contact the company that did your latest survey and see how much they will charge, or pull out the phone book.  Your flood insurance company will want a copy (along with a recent picture of the front and back of your house), and the Pinellas County Property Appraiser wants a copy too (she should have information on how to send it to her on her website).  

ELEVATION CERTIFICATE: The two important numbers you need off the EC are the “BFE” (Base Flood Elevation) which is how high FEMA thinks it will flood at your house (mine is 11′) and the “top of bottom floor” which is the floor inside your house on slab (mine is 8′).  This means I am a “minus 3” and this number will determine the new flood insurance rate for a new owner.  The crazy flood insurance rates that are being quoted on the news have been from the beaches where they are probably -5 or -6 (Treasure Island, at least)  Obviously raising your house at or above the BFE will get you the best rate.  

FLOOD ZONES: You should also know what flood zone your are in.  Most of my neighborhood is Flood Zone “AE” which is the other important thing an agent needs to know, but the homes directly along Boca Ciega Bay are “VE” (think “V”=velocity, meaning wind-driven flooding) and some of the non-waterfront homes towards the northeast corner might be “X” (not a flood zone) (Pinellas residents can check the flood zone maps online to be sure.  

Note: Flood Zone is not the same as Evacuation Zone which is stated on the Pinellas Property Appraisers website  

If you are non-subsidized (categories 1, 3 or 4 from previous blog) then your EC may actually bring your rates down, so it’s definitely worth getting and your insurance company is going to require it soon anyway.  Also they should be checked for accuracy – people have found discrepancies in zoning or BFE from the maps and argued their way into better rates.   

I hope these blog posts have educated you enough to have a better understand of how flood insurance works and the impact of the Biggert-Waters Act.  If you have additional questions you should contact your insurance agent ASAP.

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The Bottom Line on Flood Insurance

Due to the signing of the “Homeowner Flood Insurance Affordability Act” on March 21, 2014, some of the content of this blogpost has changed. Please refer to my post “Flood Insurance Update

DISCLAIMER: I am certainly not an expert or an insurance agent, but these are my personal take-a-ways from community meetings, handouts and online research. For specific information regarding your home, you should contact your insurance agent.

 

HOW THE BIGGERT-WATERS REFORM ACT AFFECTS YOU

Pinellas County is the most affected county in the COUNTRY, and where I happen to live, so the information is targeted here.  But the rules are the same – you just need to find out if your home is pre-FIRM or post-FIRM to see how the new rules apply to you.

 

Remember, flood insurance is required if you have a mortgage on your home and the home is located in a flood zone (there may be exceptions to this, but this is the norm).  The vast majority of flood policies are through various insurance companies that administer the National Flood Insurance Program (NFIP).

 

– FYI: You can go online to determine the date of the most recent FIRM map for your home. Most of the houses in my neighborhood, and many, many in Pinellas County are “pre-FIRM” meaning that they were built before the flood maps were in place (in the late 60’s/early 70’s) and their flood insurance with the NFIP has been grandfathered all along.

 

– Homeowners will generally fall into one of these 4 categories:

 

#1

In general, post-FIRM houses are raised homes built to code based on the most recent map, and they have never been subsidized, so they should only see the routine annual raises in flood insurance rates (up to 20%, plus an extra 5% to fund a reserve fund mandated by the Biggert-Waters Act.)

 

#2

(a) If you have a pre-FIRM home (built on slab, before community flood maps – call your agent to be sure), and

(b) it is your primary residence (meaning 85% occupancy according to one speaker – but check with your agent), and

(c) you have had NFIP insurance on your home continuously since before the Act was signed on July 6th, 2012 (switching companies does not mean a new NFIP policy – check with your agent if you’re not sure)

 

You will remain grandfathered until:

– the property is sold (new rates will be charged to the next owner), or

– a new policy is purchased, or

– you property suffers severe, repeated flood losses (which applies to many properties in the Shore Acres area of St Petersburg, for example), or

– policy lapses

(**DO NOT let your policy lapse accidentally. If your flood insurance payment is escrowed through your mortgagee, you are still responsible to have it paid on time, even if that means paying it cash yourself and taking it up with your mortgage company later.  It is very important to track this because you will lose your subsidized flood insurance rate even if it’s the mortgagee’s fault**)

 

#3

If you fit (a) and (b) above, but your flood insurance policy was effective after July 6th, 2012, then beginning October 1st, 2013, your next renewal will be at the unsubsidized rates. 

You will get a letter from your insurer to obtain an Elevation Certificate which will determine your new rate if you haven’t already submitted one.

 

#4

If your home is a non-primary residence (2nd homes, investments, rentals, etc), a business, or a severe repetitive loss property, you will see an immediate 25% increase in your rate, and it will go up each year until your rate equals the unsubsidized rate.

 

If you are #2, you can breathe a sigh of relief, but please understand that this law still affect you!  

– You may not be able to sell your home because a new buyer may not be able to afford the new flood insurance premiums, which may result in decreasing home values.  And your neighbors’ decreasing home values have a negative affect on your home value!

– Your friends and neighbors may be #3s or #4s and they may not be able to afford the increases, which may include rent increases, and we may possibly see another round of foreclosures.

– Many of the local businesses where we are trying to encourage growth are in the flood zone and will pass their increases onto us customers if they can afford to. (One example from the TI community meeting was a business whose insurance will be going up to $3000 per month.)

 

WHAT TO DO ABOUT IT?

That’s a topic for my next blog post!