Consumer Alert: Changes in Flood Insurance Maps; (Dec-2009)
FEMA Flood Maps are Changing
The Federal Emergency Management Agency (FEMA) and the National Flood Insurance Program (NFIP) are updating flood hazard maps across the country. These new flood maps, also, known as Digital Flood Insurance Rate Maps (DFIRMs), show flood risk at a property-by-property level. Changing weather patterns, erosion, and development can affect floodplain boundaries. The NFIP is currently updating and modernizing the nation's Rate Maps. Your home could be affected by these changes.
What are Flood Maps?
To identify a community's flood risk, FEMA conducts a Flood Insurance Study. The study includes statistical data for river flow, storm tides, hydrologic/hydraulic analyses, and rainfall and topographic surveys. FEMA uses this data to create the flood hazard maps that outline your community's different flood risk areas.
Flood Maps and Home Insurance
Everyone could sustain a loss from flooding, but not everyone faces the same level of flood risk. The NFIP helps communities understand their risk with flood maps. Risk levels are broken into three categories:
|High Risk Areas||Medium Risk Areas||Undetermined Risk Areas|
|• Areas with at least a 1% chance of flooding annually.||• Areas with less than 1% chance of flooding annually, but the possibility is not completely removed.||• Areas where flood-hazard analysis has not been conducted but a flood risk still exists.|
|• Flood insurance is required for anyone with a mortgage from a federally regulated or insured lender.||• Flood insurance is not required, but it is recommended for all property owners because the risk of flood is still present.||• Flood insurance is not required but flood risk still exists.|
Federally regulated or insured lenders must require flood insurance on properties that are located in areas at high risk of flooding. Even if your home is in a medium or undetermined risk area, you should consider purchasing flood insurance because your property is still at some risk of flooding. You should remember that any lender can require flood insurance, even if it is not required to under federal law.
Why is FEMA Changing the Flood Maps?
The NAIC conducted the Health Insurance IQ study Oct. 21-26. The participant sample included a nationally representative sample of 1,000 American adults ages 18 and older with a margin of error +/- 3.1 percent in 95 out of 100 cases.
What Will Happen if my Home Changes Flood Zones?
When new maps are issued, your risk may have changed as well - along with your flood insurance requirements. However, there is usually a six- to twelve-month period between the time the new "preliminary" maps are issued and the time that they are implemented. This gives you adequate time to protect your property and, possibly, save on flood insurance.
If your property is mapped out of a high-risk area, your flood insurance costs will likely decrease. If you've been mapped into a high-risk area, you will be required to purchase flood insurance if your mortgage is through a federally regulated or insured lender. However, you can save money through a process known as "grandfathering." You can take advantage of grandfathering by obtaining a policy before the new maps take effect. You'll likely qualify for the NFIP Preferred Risk Policy (PRP), which covers buildings and their contents for as little as $119 for the first year. On renewal, you will qualify for the standard rates associated with moderate-to-low risk zones, rather than high-risk zones. To lock in the lower rate, you must purchase flood insurance before the new maps become effective - otherwise, the property will be rated using the high-risk flood zone on the new map.
If you live near a levee, your flood risk may be higher than you thought. Hundreds of levees across the country no longer meet federal standards for protection, so when new maps are issued, these areas will be shown as high risk.
FEMA uses the most accurate flood hazard information available and applies rigorous standards in developing the FIRMs. Recognizing that there will be some instances when areas are nonetheless inappropriately included in a high- or medium-risk area, FEMA established administrative procedures to change the designation for these properties on the FIRM. You can go to FEMA's website to learn more about this process.
Flood Insurance Basics
Standard homeowners insurance does not cover flooding; therefore, it is important to have protection from the floods associated with hurricanes, tropical storms, heavy rains and other conditions that impact the U.S. In 1968, Congress created the NFIP to help provide a means for property owners to financially protect themselves. The NFIP offers flood insurance to homeowners, renters, and business owners if their community participates in the NFIP. Participating communities agree to adopt and enforce ordinances that meet or exceed FEMA requirements to reduce the risk of flooding.
Buying Flood Insurance
NFIP estimates that more than five million people have flood insurance policies in more than 20,000 communities across the U.S. Flood insurance is sold by licensed insurers. If you are in a high-risk area, or would like to find out more about flood insurance, contact your insurance company or agent to find out if your community participates in the NFIP and to get a quote.
Flood Insurance Coverage - Building Versus Contents
Flood insurance protects two types of insurable property: building and contents. The first covers your building, the second covers your possessions. Flood insurance does not cover the land that your building occupies.
|Building Coverage||Contents Coverage|
|• The insured building and its foundation||• Clothing, furniture, and electronic equipment|
|• The electrical and plumbing system||• Curtains|
|• Central air conditioning equipment, furnaces, and water heaters||• Portable and window air conditioners|
|• Refrigerators, cooking stoves, and built-in appliances such as dishwashers||• Portable microwaves and dishwashers|
|• Permanently installed carpeting over unfinished flooring||• Carpeting that is not already included in property coverage|
|• Clothing washers and dryers|
Flood Insurance Coverage - Replacement Cost Value Versus Actual Cash Value
The two most common reimbursement methods for flood claims are Replacement Cost Value (RCV) and Actual Cash Value (ACV). The RCV is the cost to replace damaged property. It is reimbursable to owners of single-family, primary residences insured to within 80% of the building's replacement cost. All other buildings and personal property (i.e. contents) are valued at ACV. The ACV is the RCV at the time of loss minus physical depreciation. Personal property is always valued using the ACV.
The NFIP is part of FEMA and not subject to state regulation. If you have any questions about the flood insurance, you should consult the NFIP website at www.floodsmart.gov.
If you have questions or are confused about your insurance coverage, contact the Massachusetts Division of Insurance at 617-521-7794 or visit www.mass.gov/doi.