The importance of flood insurance
“Thanks Keith – this [elevation survey & certificate] helped [our client] a lot – quote went down to $460 – down from $2599.”
– Staci Herring, State Farm Insurance
For those of you who are homeowners with a mortgage, purchasing flood insurance is mandatory in a participating community if the loan is federally insured or the federal government regulates the lender.
Flood insurance is highly advisable even if you are not required to purchase but are located near a stream or lake. Remember, the 1-percent chance storm has a 1 percent chance of being met OR EXCEEDED in any year. Over the life of a 30 year mortgage there is a 26% chance of having a flood event that exceeds the base flood elevation.
Mortgage insurance rates are generally less the higher above the base flood elevation where your finished floor is located. Therefore, if you are four feet above the BFE the rates should be lower than if you were at or below the BFE. A $300 policy may well be worth the peace of mind it brings. Your homeowner policy has an exclusion from any flood damage.
You should also know that just because you are above the BFE and far away from a running stream, many dry ditches have caused significant damage to a home during a flash flood. Again, your homeowner policy is useless in this case but a flood policy would cover this damage.
purchasing flood insurance is mandatory if the loan is federally insured or the lender is regulated by the federal government
As stated above, your mortgage company may be required to ask you to purchase flood insurance. Of course, they would want you to do so because they are protected also. You should also know that the mortgage lender may also require flood insurance even if it is determined you do not need it. This is their prerogative. Again, the rates should be rather low in this case, but there are some costs nonetheless.
Now that you know a little about the overall situation, how does this affect you directly? If you are in or near a flood hazard zone, or if you are going to be in or near a flood hazard on the proposed maps, NOW is the time to act. The following are the possible situations in which you may find yourself:
- Out of the flood hazard zone completely on the old and new maps. This is great. In this case, there is no requirement for the purchase of flood insurance. However, as we said below, if there is ANY risk you might want to consider it. An evaluation of your risk is quick and easy.
- Your lot is currently or proposed to be in the flood hazard zone. This puts you under the requirement for flood insurance. Your situation may now be one of the following:
- Your lot is in the flood hazard zone but the lowest adjacent grade (LAG) around your house is out or above the base flood elevation (BFE). In this situation, the flood insurance requirement may be removed. This process is called a Letter of Map Amendment (LOMA).
- Your lowest adjacent grade (LAG) is below the BFE but the lowest finished floor elevation (FFE) is above the BFE. In this case, you need to purchase flood insurance. An Elevation Certificate is necessary as a way to determine your premium rate.
- Your lowest finished floor elevation (FFE) is below the BFE. This case is similar to 2.b. above but the flood risk is higher. Again, get an elevation certificate to determine your premium rate.
If you are in situation 2 above, the first step is to get an elevation determination. A licensed land surveyor who will measure the elevation of your finished floor elevation and the lowest adjacent grade to determine your location relative to the flood hazard zone does this process.
This process will produce an Elevation Certificate that can be used to either complete the LOMA process or allow your insurance agent to set the flood insurance premium rate. A flood assessment might be exactly what you need to determine whether your home is at risk for flood damage.
Please let us know if you would like to schedule a flood assessment with us, or if you would like more information feel free to contact us. We look forward to hearing from you!
For assistance on flood determination and flood insurance, call us at 256 854-9503 or send us a message by clicking here.