Flood Insurance

When the Biggert Waters Act of 2012 (BW12) was passed, one of Congress’ goals was to allow for lender acceptance of private flood insurance policies to satisfy the mandatory purchase requirement. The Act contained vague language, and it took lending regulators seven years to finalize a rule for lenders to follow. Prior to the lending regulators creating the final rule, many lenders didn’t accept private flood policies as they were uncomfortable verifying compliance with the BW12 definition and worried about noncompliance fines and collateral protection.

If you are like me, when the newly formatted NFIP Flood Insurance Manual came out on October 1^st, you probably thought, “Well great! Now I have to start all over again learning this manual.”  I’ve been using the NFIP Flood Insurance Manual for over 16 years and have learned through long experience where to find certain flood insurance topics. I certainly didn’t relish having to re-learn where to find information. Despite the new format being more logical and following a transaction-by-transaction path through the lifecycle of a flood insurance policy, my first impulse was to cringe and curse.

If you are like me, when the newly formatted NFIP Flood Insurance Manual came out on October 1^st, you probably thought, “Well great! Now I have to start all over again learning this manual.”  I’ve been using the NFIP Flood Insurance Manual for over 16 years and have learned through long experience where to find certain flood insurance topics. I certainly didn’t relish having to re-learn where to find information. Despite the new format being more logical and following a transaction-by-transaction path through the lifecycle of a flood insurance policy, my first impulse was to cringe and curse.

The Federal Emergency Management Agency’s (FEMA) “Clear Communication Initiative” is intended to inform federal flood insurance policyholders of their flood risk as reflected on the most current Flood Insurance Rate Map (FIRM).  This is something congress mandated in the Homeowner Flood Insurance Affordability Act (HFIAA, and specifically Section 28 of that Act).  The reasoning is sound, but there are parts that may be confusing, so I want to try and explain “Clear Communications”.

So you finally did it.  You saved up enough money to put a down payment on your first home, and pay closing costs.  You spent hours completing paperwork, and gathering documents for your mortgage lender.

In early 2016, FEMA began mailing out clear communication initiative letters to flood insurance policyholders with new policies effective April 1, 2016 or later, and/or renewal dates of October 1, 2016 or later.  The purpose of these letters was to inform the policyholders of their current, re-mapped flood risk rating, and explain how that rating was assessed, as well as how it would likely impact what one would pay for flood insurance.  The letters further explain how the property owner may reduce flood insurance premiums by obtaining an Elevation Certificate.

FEMA separated the letters into 7 categories, each defined by a letter, A-F.  Your category can be found in the bottom right hand corner of your letter.  The categories are as follows:

Who doesn’t want to lower the cost of… everything?  Flood insurance is one of those things where consumers might feel a little helpless because most flood insurance is issued through the Federal Emergency Management Agency (FEMA) so the rates are what they are.  First, find a knowledgeable agent that really knows the National Flood Insurance Program.  Second, check out our list of the top 5 ways to lower your premiums.

#1 Get an Elevation Certificate

We are asked this all the time and rightfully so.  You are told you need to buy a flood insurance policy, which is separate from your homeowner’s policy.  And then you are told you need a separate elevation certificate to calculate the proper premium.  Or maybe you already have flood insurance and you were told getting a proper elevation certificate could lower your rising premium.  So what does the elevation certificate cost?

The national average cost for an elevation certificate is about $600 and the range is about $169 to $2,000 or more.  There are a lot of reasons elevation certificate costs vary, including: occupancy type, structure type, demand, location, timing, data, and quality.

This is a follow-up on our last blog about the conversations we have with property owners wanting to cancel their flood insurance policy.  It’s a complex decision that affects the risk we accept and how we mitigate that risk.  If you like facts and data, here’s some information that might help make a decision that’s right for you.

Homeowner’s insurance does not cover losses from flood disasters.  This is the primary reason it’s a big deal.  You need a separate flood insurance policy to be protected from flood disasters.

Property owners cancel their flood insurance policies for a lot of reasons.  It can be an expensive policy to carry, so we understand.  At MassiveCert we are in the business of helping homeowners untangle the requirements and regulations to get the flood certification you need as easily as possible.  We are on your side.

Here are some of the conversations we’ve had with concerned property owners like yourself that are thinking about dropping their flood insurance policies.