Flood Insurance 101

Coverage

2015 Changes

• Increse in reserve fund assessment
• annual surcharge on all new and renewed policies
• an additional deductible option
• rate increases for most policies

The Least to know

• Every building is in a flood zone
• You can purchase flood insurance for any zone, not just high-risk ones
• You need to purchase coverage seperately for a building and its contents.
• You can file a claim without federal declaration of disaster
• The Standard flood insurance policy isn’t guarenteed replacement cost policy
• The standard flood insurance policsy provides limited coverages for basements
• the standard flood insurance policy exlcuedes “time-element exposures”

NFIP offers Write Your Own(WYO) insurance companies as well as the NFIP Direct Servicing Agents.

Find if the community paticipates in NFIP www.fema.gov/fema/csb.shtm

Ways for a community to participate in the NFIP

NFIP Coverage Limits

Residental (1-4 family)

• Building – Emergency Program: $35,000, Regular Program: $250,000
• Contents – Emergency Program: $10,000, Regular Program: $100,000

Other Residental

• Building – Emergency Program: $100,000, Regular Program: $500,000
• Contents – Emergency Program: $10,000, Regular Program: $100,000

Non-Residental

• Building – Emergency Program: $100,000, Regular Program: $500,000
• Contents – Emergency Program: $100,000, Regular Program: $500,000

Flood insurance is different from disaster insurance because; No presidential declaration required, it is not a loan with interest that is required to be paid back.

Basics of Flood Zones

Various characteristics of a SFHA(special flood hazard area) are:

• “100-year floodplain” with 1 percent annual chance of flood
• At least a 26 percent chance over a 30 year mortgage
• High-risk zones comprising A zones and V zones(coastal)

Characteristics of a non-sfha are:

• moderate to low risk
• B and C zones(older maps)
• X zones(more recent maps)

FIRM =Flood Insurance Rate Map

FIRM is an official map showing:

• Flood Zones
• Base Flood Elevations(BFE)

You can locate the FIRM for specific street address  at www.msc.fema.gov

Pre-FIRM: Built before intial FIRM or On or before 12/31/1974

Post-FIRM: On or after the initial FIRM or After 12/31/1974…whichever is LATER

3 types of Standard flood insurance policy forms

Dwelling Form

• Residential building, 1-4 families.
• Individual condo units
• manufactured homes
• renters (for contents)

General Property Form

• Residential, more than 4 families
• Nonresidential buildings
• Commercial
• schools
• churches
• etc.

Residential Condominium Building Association Policy

Buildings owned by condo association (individual unit owners purchase a dwelling policy)

30 Day Waiting period

30 days before any new or modified flood insurance policies go into effect

EXCEPTIONS

• insurance in connection with a loan.
• Insurance purchase w/in 13 months of a map revision.
• Wildfire exception.

PRP(Preferred Risk Policy)

• Offers lower cost option for low and moderate risk zones: B, C and X
• Depends on loss eligibility: Apply to any 10-year period, regardless to change of ownership
• Depends on upfront documentation requirements
• Is available for:
  • individual condo owners, but not the association
  • Residential risks
  • non-residential risks

NFIP’S definition of a flood

• A general condition
• A temporary condition
• Partial or complete inundation such as; overflow of inland/tidal waters or Unusual and rapid accumulation or runoff of surface waters from any source.

“Flood” includes mudflow, which: refers to a river of liquid or flowing mud on normally dry land

“Flood related erosion” is the collapse or subsidence of land along the shore of a lake or similar body of water.  Is caused by waves or currents exceeding cyclical leves.  Results in flooding.

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Types of coverage

Coverage A: Building Property

Buildings should: Have at least two rigid exterior walls and a fully secured roof.  Be principally above ground level.  Be affixed to a permanent site.

Buildings may include: Manufactured(mobile) home or travel trailer

Coverage A  for buildings under construction:  Applies prior to “2 rigid exterior walls and a roof”

• offers coverage while work is in progress or up to 90 days after work is halted.
• Building deductible is doubled
• offers no coverage if lowest floor is below Base Flood Elevation (BFE)

Covers materials and supplies; stored in the building, stored on adjacent property

Additions and Extensions: “Building” includes additions and extensions attached to and in contact with the building, by means of; rigid exterior wall, stairway, roof, solid load-bearing interior wall, elevated walkway

Coverage A: Appurtenant Structures (detached garages)

• 10% of building coverage can be applied only to detached garages under the dwelling form
• not additional coverage; take from limit for building

Dwelling policy only;  Not general property policy, not RCBAP(condo association)

• If a detached garage is used for residential business, or farming purposes, it must be insured separately.

Coverage A: Other forms of Building: (examples of “building property” not personal property; Awnings, canopies, blinds, built-in dishwashers, carpet permanently installed over unfinished flooring, central A/C, Elevator equipment, fire sprinkler systems, furnaces, radiators, garbage disposals, light fixtures, ourdoor antennas and areials fastened to buildings, permanently installed cupboards, bookcases, cabinets, paneling and wallpaper, plumbing fixtures, pumps, machinery, ranges, cooking stoves/ovens, refrigorators, walk-in freezers, wall mirrors(permanently installed), water heaters(inc solar)

Coverage B: Personal Property

You need different forms for different types of personal property

Dwelling Forms are for; contents that you own in ANY BUILDING at the described location

General property/RCBAP forms: contents inside a fully enclosed insured building

THEY ARE SEPERATE COVERAGES: Coverage A insures the building property. Coverage B insures the personal property. Need both?  Purchase both.

Examples of personal property: portable A/C units, Carpets over finished flooring, carpets not installed permanently over unfinished flooring, clothes washers and dryers, cook-out grills, freezers(not walk-in), food in any freezer, portable microwave ovens, dishwashers

Under the general property form, coverage b covers either household personal property or non-household personal property—but not both.

Household personal property examples: Typical household personal property, property belonging to you or to a family member, or at your option property belonging to a guest or servant.  Also property you may be liable for.

What’s a basement?  Standard FIP = any area with it’s floor below ground level on all sides.  Includes sunken room or rooms with sunken area.

“Any area of the building, including any sunken room or sunken portion of a room, having its below ground leve(subgrade) on all sides.”

Coverage A (Building Property) in basements and enclosures:

• Central air conditioners
• Cisterns & the water in them
• Unfinished drywall (walls, ceilings) in a basement
• Electrical junction and circuit breaker boxes
• Electrical outlets and switches
• Elevators and related equipment
• Fuel tanks and fuel in them
• Furnaces and hot water heaters
• Heat pumps
• Non-flammable insulation in a basement
• Pumps and tanks used in solar energy systems
• Stairways and staircases (attached to building)
• Sump pumps
• Water softeners and chemicals in them, water filters and faucets installed as integral part of plumbing system
• Well water tanks and pumps
• Required utility connections for items on this list
• Footings, foundations, posts, etc., required to support building
• Clean-up

“Applies to basements in ANY zone and post-FIRM enclosures in SFHA’s. ”

Personal property items in basements that can be covered under coverage B are:

• Portable/window A/C’s
• Clothes washers and dryers
• food freezers(other than walk-in)and the food.

Equipment must be in a functioning location and connected to a power source.

Coverage C: Other Coverages

Removal of debris, which includes:

• non-owned debris in insured property
• owned debris from anywhere
• value of your labor for removal (at minimum wage)

Loss avoidance measures for:

• sandbags, supplies, labor (up to $1000)
• property removed to safety (up to $1000)

Condo loss assessment (dwelling form)

• assessed to your unity by condo association
• up to the liability limit coverage A

Pollution Damage (general property form)

• $10,000 maximum limit
• Does not include testing or monitoring, unless required by law or ordinance

Coverage D: Increased Cost of Compliance

• Post flood cost to comply with floodplain management ordinances related to: elevation, relocation, demolition, floodproofing(non-residence)
• Requires substantial damage or repetitive loss of:  At least %50 of market value or loss in 2 floods in last 10 years
• up to $30,000, no separate deductible

Property not covered and exclusions by SFIP:

• Personal property outside the fully enclosed building
• Property in, on, or over water
• Walks, decks & driveways
• Land, trees, shrubs
• Fences, seawalls, piers, docks
• Self-propelled vehicles, recreational vehicles
• Livestock
• Crops
• Accounts, bills, coins, currency, other valuable papers
• Underground structures, equipment (e.g., septic systems)
• Storage for gases, liquids
• Pools and equipment; hot tubs (except as bathroom fixtures)
• Loss of revenue or profits
• Loss of access or use
• Loss from interruption of business
• Additional living expenses

Examples of exclusions not covered:

• Sewer backup/seepage
• overflow from sump pump
• seepage or leaks
• pressure or weight of water

NFIP loss settlement options:

Deductibles

Some important features of deductibles are:

• Minimum deductibles are tiered
• Higher deductibles are available
• Separate for building and for contents
• Deductible doubles for buildings under construction
• No deductible for:
  • loss avoidance measures
  • loss assessments
  • increased cost of compliance

Loss settlement options for NFIP:

-Replacement Cost Value(RCV) for single family dwelling and property owned by condo association

RCV applies only to building, single family dwellings.  Must be insured’s principal residence and have 80% RCV or Maximum allowed under NFIP

Residential Condo Building Association Policy (RCBAP)-applies to condo assoc property, units in the building and improvements to units.  Must be 80% of replacement cost

-Actual Cash Value(ACV) for ineligible single family dwellings, other dwellings, non-residential buildings

Contents always = ACV

ACV loss settlement applies to: 2-4 family, single family not eligible for RCV, non-residential buildings, detached garages, mobile homes under 16 ft wide and under 600 sq ft

Special settlements for manufactured homes and travel trailers; built on permanent chassis or fixed to permanent foundation.  At least 16′ wide, at least 600 sq ft.  Principal residence.  Partial loss covered replacement cost.

If its a total loss, coverage is the least of

• buildings limit of liability
• replacement cost of dwelling
• 1.5 times ACV

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Rates

Subsidized rates:

• Do not represent buildings true flood risk
• Determined w/limited underwriting information
• Discounted rates that have been traditionally available for buildings built before community first adopted FEMA flood maps and guidelines
• Pre-FIRM building in A or V zones

 Full-Risk Rates:

• Represent the buildings true flood risk
• Premium reflects the risk assumed by the program and all administrative expenses
• Takes into account the full range of possible flood  loss

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Elevation Certificates

• Elevation refers to the height of the structure relative to the Base Flood Elevation (BFE)
• A structure above BFE is less likely to experience flood damage.
• Less risk=lower premiums

Base Flood Elevation = Base flood is a flood that has a 1% chance of being equaled or exceeded.

BFE is the  expected height of that 1% chance of flood

What is an elevation certificate?

• To correctly rate a flood insurance policy, you must identify the lowest floor of a building
• The EC documents several elevation levels (i.e. lowes level of bottom floor and lowest adjacent grade)
• The EC; certifies building elevation, documents community compliance, determines policy rates and supports map revisions and amendment

Who certifies the elevation?

• a surveyor, engineer, or architect must certify the building elevation
• The insurance agent uses this information for rating

Where can you find a qualified professional?

Word-of-mouth, state professional association for land surveyors(www.lsrp.com/lsassocbystate.pdf), State NFIP coordinator, Local community’s building permit office, yellow pages or internet under “surveyors”

Use of EC conditions

• Pre-FIRM construction(not required unless full-risk rates are more favorable)
• Non-SFHA zones (B,C and X zones, no elevation certificates)
• Post-FIRM construction(EC’s required in most cases)

Various Buildings

• Elevated with no basement(usually built near coast)
• Enclosed building with partially or fully shut in, rigid walls

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Floodsmart.gov is an official web site for NFIP for agents and their clients.

www.fema.gov/flood-insurance-manual