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Flood Insurance Q & A

This is a summary of info from the NYSDEC, FEMA and the Flood Processing Center, by Daniel King and Brian Kroll, licensed agents, registered with the National Flood Insurance Program.


GENERAL QUESTIONS

1.)Map Modernization: What is it?

2.)Why Update the Maps? Why Now?

3.)When is the new proposed map scheduled to be adopted?

4.)When is flood insurance required?

5.)How can I find out if my property is in the proposed flood zone?

6.)What if I disagree with FEMA's flood zone determination?


NO STRUCTURE IN FLOOD ZONE, USE LOMA-OAS.

7.)If my property (land) is in the high-risk flood zone, but my structure is not, what should I do?


DETACHED STRUCTURE IN THE FLOOD ZONE

8.)Can a mortgagee require flood insurance on a detached structure (garage) that is in a high-risk flood zone?


MORTGAGE ISSUES

9.)After a mortgage has been granted for a property in a moderate/low-risk flood zone X, can the mortgagee at a later date require flood insurance?

10.)What if I have no mortgage?


THE THREE MOST COMMON SETS OF FLOOD RATES

11.)How much does flood insurance cost for a home?


TRANSITIONAL PROGRAM, GRANDFATHERING, ASSIGNING POLICY

12.)My property is being transitioned into the high-risk flood zone A. What is the special two year Eligibility Extension program?

13.)How can I increase the resale market value of my home that’ll be in the new flood zone?

14.)What is the procedure to ASSIGN a flood policy to a new property owner?

15.)How can a new property owner, or insurance agent, find out if there exists a grandfather - rated flood policy that could be assigned to the new property owner?

16.)What are the different types of Grandfathering?

17.)If a property is currently in the high-risk flood zone A, and the new map shows zone X (moderate/low-risk flood zone), how soon can the lower rates be enjoyed?


LANCASTER, NY VILLAGE QUESTIONS

18.)Why are the levees in Lancaster, NY being ignored, as if they do not exist?

19.)Who is the Lancaster Floodplain Administrator?

20.)Is the Village appealing or protesting during the one-time formal 90 day appeal period?

 


 

GENERAL QUESTIONS

1.) Q: Map Modernization: What is it?

A: The local Map Modernization project is part of a nationwide effort to update the country’s flood hazard maps so that they reflect the most current flood risks. Erie County residents and businesses now have up-to-date, reliable, Internet-accessible information about their flood risk on a property-by-property basis.


2.) Q: Why Update the Maps? Why Now?

A: Flood hazard maps, also known as Flood Insurance Rate Maps (FIRMs), are important tools in the effort to protect lives and properties. Over time, water flow and drainage patterns have changed dramatically due to surface erosion, land use and natural forces.

New Maps = A Safer Public By showing the extent to which areas are at risk for flooding, the new flood maps will help home and business owners understand their current flood risk and make more informed decisions about protecting their property. These maps will also allow community planners, local officials, engineers, builders and others to make important determinations about where and how new structures and developments should be built to maximize safety.


3.) Q: When is the new proposed map scheduled to be adopted?

A: For flood map panels affected by an uncertified levee including most of the Village of Lancaster, this is on hold until further study. For the rest of Erie County, NY, probably in late 2012 or in 2013, depending on FEMA's ability to implement. The Mapping Status of counties in NY will be updated here: http://www.rampp-team.com/ny.htm. Note that the National Flood Insurance Program is currently authorized only until July 31, 2012. Then it must be re-authorized by Congress and signed by the President before new applications will be accepted, so please apply before that date.


4.) Q: When is flood insurance required?

A: Reason #1. When a structure is in a Special Flood Hazard Area (also known as SFHA, or the high-risk flood zone A), a federally regulated lender* requires flood insurance up to the value of the mortgage. Or the lender may require insurance up to the structure’s replacement cost, to protect their interest in the loan.

And Reason#2. When the loan agreement requires flood insurance, no matter which flood zone the property is in.  If you don’t like it, try to negotiate with the lender or shop around for a new lender.


5.) Q: How can I find out if I'm in the proposed high-risk flood zone and require flood insurance?

A: Look at the proposed map online to see if your structure is in the high-risk zone. Here are directions
It is not possible to get a definite zone determination for a specific property until the new map is adopted. This makes it impossible for a property owner to definitely know ahead of time if they need to lock in a moderate/low-risk flood zone rated policy. The mortgagee is the final determiner if flood insurance is required.

If you’d like to know your flood zone determination, either now or after the new map is adopted, send us an email to FloodZoneRequest@thilldemerly.com.

In the subject line put Flood Zone Request, and tell us 1) your name 2) property address 3) daytime phone number.


6.) Q: What if I disagree with FEMA's flood zone determination?
A: This website http://www.fema.gov/hazard/map/lomc.shtm describes the more common ways an individual property owner may apply for a letter of map change: 1) a Letter of Map Amendment (LOMA, free) and 2) a Letter of Map Revision–based on Fill (LOMA-F, $425 filing fee).

Through either of these, an individual may submit mapping and survey information to FEMA and request that FEMA officially remove a property and/or structure from the SFHA. In most cases, the applicant will need to hire a Licensed Land Surveyor or Registered Professional Engineer to prepare an Elevation Certificate for the property and to certify that the lowest adjacent grade (the lowest ground touching the structure) is equal to or higher than the Base Flood Elevation. (Cost: $200~$700)

A Letter of Map Revision Based on Fill (LOMR-F) is removal from the high-risk flood zone based on the placement of fill outside the existing regulatory floodway. The participating community must also determine that the land and any existing or proposed structures to be removed from the SFHA are "reasonably safe from flooding."

Other forms of appeal:
- A short version of a LOMA, called a Letter of Map Amendment - Out as Shown (LOMA-OAS, free), that does not require an elevation certificate. This is used when a structure is clearly outside the high-risk zone A. See Q&A#7 below.
- Letter of Map Revision (LOMR). Usually done by a subdivision or community, this changes flood zones, delineations, and elevations.
- Letter of Determination Review. (LODR, $80) Try a LODR if you think you’re in zone X and the mortgagee says zone A. This is rarely used; applicant must submit within 45 days of the flood insurance requirement. FEMA will make the zone determination.
Also, ask the Community Flood Plain Manager or Building Inspector for advice.

Questions about LOMAs may be directed to FEMA Map Assistance Center at 1-877-FEMA-MAP. Many web pages are available at FEMA’s website, www.fema.gov, for further information on appealing your flood zone.

Remember that you may be required to carry flood insurance, no matter which flood zone your structure is in, just based on your loan agreement.

“The purchase of a flood insurance policy is wise even if a structure is located outside the SFHA. More than 25 percent of flood claims are made by property owners located outside the SFHA. The issuance of a LOMA or LOMR-F does not mean the structure or lot is safe from all flooding; it means that the risk of flooding is not as high as it is in the SFHA. Events greater than the 1-percent-annual-chance event can and do occur. It is also important to note that the flood insurance premium rate for structures located outside the SFHA is lower than the premiums for structures located in the SFHA.”

NO STRUCTURE IN FLOOD ZONE, USE LOMA-OAS.

7.) Q: If my property (land) is in the flood zone, but my structure is not, what should I do?

(In the village of Lancaster NY there are about 200 property owners whose structures are NOT in the high-risk flood zone A according to the new proposed flood map, but their property's land is in zone A. Be aware that a property owner can not get a definite new zone determination prior to the adoption of the proposed flood map.)

A: The DEC’s advice: If part of the property is in the flood zone but the structure is not, the property owner should wait until the new maps take effect and only take action if their bank requires flood insurance.  If that is the case, and the map clearly shows the structure as being out, then they can get a Letter of Map Amendment "Out as Shown" (LOMA-OAS) without need for a survey.

Please see the Loma-OAS Guidance Form from the Association of State Floodplain Managers (ASFPM) about applying for an "Out as Shown" LOMA.  The state of Kansas also put some good Loma-OAS Instructions together. Here is a LOMA-OAS App Highlighted to make it easier.

The Lancaster Village’s Citizens Group on Flood Risk Remapping will hold several public meetings after the new map is adopted to help people with their LOMA-Out-As-Shown applications.

If the structure is close to the flood zone, or is partially or entirely in the flood zone on the flood map, then an elevation certificate would be required to get a Letter of Map Amendment (LOMA). 


DETACHED STRUCTURE IN THE FLOOD ZONE

8.) Q: Can a mortgagee require flood insurance on a detached structure (garage) that is in a high-risk flood zone?

A: At this time, mortgagees generally do not require flood insurance on detached structures, BUT YES a mortgagee can require flood insurance on any building in a high-risk flood zone. They may require a separate non-residential flood policy for each building. Here are sample rates for a non-residential structure without a basement. If you buy a separate flood policy before the new map is adopted, you lock-in Zone X (moderate/low-risk) rates forever. If you wait until after it’s adopted, you’ll get zone A rates which are usually more expensive. For example, $12,000 on the structure; $5,000 deductible; zone X is $130/year Vs $201 in Zone A.
Check with your mortgagee for the highest deductible they will accept.

Also, be aware that at the time of loss, an insured can designate 10% of their Flood policy’s limit (main building) for detached structures. A mortgagee may approve this use of 10% for the detached structure.

Here is the NFIP’s Mandatory Purchase of Flood Insurance Guidelines September 2007 or our highlighted version. There are references to requiring flood insurance on “improved real estate”, that is, land with a walled or roofed building.


MORTGAGE ISSUES

9.) Q: After a mortgage has been granted for a property in a moderate/low-risk flood zone X, can the mortgagee at a later date require flood insurance?

A: You should determine if the lender is requiring flood insurance due to reason #1) your structure is in high-risk zone A, or reason #2) due to the loan agreement you’ve signed, or both.
If it is reason #1 and the structure is truly in the moderate/low-risk flood zone X, lenders don’t require flood insurance. Perhaps the lender thinks it is in high-risk zone A. The zone determination is critical here. Send them proof your structure, including an attached deck, is in zone X, such as 1) a copy of the flood map that clearly shows your structure is in zone X or 2) a letter from a community official. Ask the lender what proof they will accept.

Perhaps the new flood map shows your structure in the high-risk zone. Then flood insurance will be required. See below for info on the Preferred Risk Program Eligibility Extension, Grandfathered Rates, and assigning your policy to the next owner.

If it is reason #2, due to a loan agreement, flood insurance can be required. If your structure is truly in the moderate/low-risk flood zone X, and you have had limited flood losses, you should qualify for the least expensive rates: the Preferred Risk Program.

When a lender sends a letter that flood insurance is required, it must be obtained or the issue resolved within 45 days. Otherwise, the lender is required by law to “force-place” a flood policy. Their policy can be much more expensive than one you purchase. If resolved in your favor, the policy can be cancelled in full. The property owner can purchase their own flood policy to replace the more expensive bank’s force-placed policy. So, if you receive a letter, respond immediately.
Keep in mind that 25% of flood losses occur on properties that are not considered in the high-risk flood zone.


10.) Q: What if I have no mortgage?

A: Consider buying and always renewing a minimum premium zone X policy, currently $46 a year. When your property is sold, the policy can be assigned to the new owner who will continue to pay moderate/low-risk flood rates, rather than high-risk flood rates. The policy can be changed to the limits and deductibles required by the new owner and mortgagee. If the next property owner does not have a federally backed mortgage either, they will not be required to carry flood insurance, so a property owner may want to consider holding a mortgage for the next owner - if they are comfortable with that risk. Be sure to assign your minimum premium policy to the next owner so they can always renew that policy to have the moderate/low-risk “grandfather” rates available.


THE THREE MOST COMMON SETS OF RATES

11.) Q: How much does flood insurance cost for a home?

A: Here are some sample residential flood insurance prices, limits and deductibles.
Basically, there are three programs:
1) The high-risk flood zone A rate
2) The moderate/low-risk flood zone X rate
3) The Preferred Risk Program, for moderate/low-risks, with limited previous flood losses in the last 10 years. These Preferred Risk rates also apply for up to 2 years for properties newly transitioning into the high-risk flood zone A. (see Q&A #12)

TRANSITIONAL PROGRAM, GRANDFATHERING, ASSIGNING POLICY

12.) Q: My property is being transitioned into the high-risk flood zone A. What is the special two year Eligibility Extension program?

A: Properties transitioning into the high-risk flood zone A will be allowed to buy a Preferred Risk Policy under the Eligibility Extension (subject to restrictions like limited previous flood losses in the last 10 years) for up to 2 years. After that the policy will automatically renew at moderate/low-risk flood zone X rates, forever. "This is known as locking in moderate/low-risk "GRANDFATHERED ZONE RATES." Do not allow this policy to lapse, or you will lose the zone X rate.
Compare this to a new property owner who would have to pay the more expensive zone A rates.

Here are examples of the savings. At a building limit of $150,000, with a $1,000 deductible, the savings is $593/year ($978 Vs $1,571). At $200,000, the savings is $939/year (1,153 Vs $2,092). These are May 2012 rates for a home with a basement.Sample pricing.

Preferred Risk Program prices start at $154/year for $20,000 building limit for a home with a basement; pricing is a little less for homes without a basement. A renewal in zone X at $20,000 building, $5,000 deductible, no contents coverage, is now $207/year.

This ability to lock-in the old flood zone X rates, "Grandfathered zone" rates, is a once only opportunity.

Flood insurance premiums increase due to 1) rate increases, typically 2-5% a year and 2) the building limit required by the lender. Lenders may require insurance at replacement cost, which is rising at over 2% a year. Since flood insurance is costly, it pays to lock in the cheaper rates.


13.) Q: How can I increase the resale market value of my home that’ll be in the new high risk flood zone (SFHA)?

A: Buy a moderate/low-risk flood zone X policy, or a Preferred Risk Policy- see above question, and do not let it ever cancel. You can later ASSIGN this policy to the next property owner, so they can pay the less expensive rates, rather than the expensive zone A rates.


14.) Q: What is the procedure to ASSIGN a flood policy to a new property owner?

A: Flood policy owners who have locked in the moderate/low-risk (grandfathered) flood insurance rates can sign a letter to change the name to the new property owner and request any necessary changes to the policy (building limit, contents limit, deductible, mortgage info, etc) to meet the requirements of the new owner and mortgagee. Assigning a "Grandfathered zone" policy increases the resale market value of a home in the high-risk flood zone, because the cost for flood insurance is lower than otherwise.


15.) Q: How can a new property owner, or their insurance agent, find out if there exists a grandfather-rated flood policy that could be assigned to the new property owner?

A: Ask the old property owner.


16.) Q: What are the types of Grandfathering?

A: 1) Continuous coverage. A policy that has remained in effect, without cancellation, will continue to be rated at the moderate/low-risk (Zone X) rates, rather than at the current high-risk rates (Zone A).

2) Built in compliance. You’ll need a copy of the flood map when the house was built. “Grandfather Built in Compliance Rates” mean the structure was built after the Flood Insurance Rate Map (FIRM) was originally drawn and the structure was built in compliance with the rules in effect at the time of construction. If the structure was built before the flood map was drawn, then this is Pre-FIRM construction and NOT eligible for “Grandfather Built in Compliance Rates”

3) Renewals of the Preferred Risk Policy under the Eligibility Extention. See question #12 above.


17.) Q: If a property is currently in the high-risk flood zone A, and the new map shows zone X (moderate/low risk), how soon can the lower rates be enjoyed?

A: After the map is adopted, the policy can be rewritten into the Preferred Risk Program, or to the cheaper zone X rates, back to the beginning of the current policy term.


LANCASTER, NY VILLAGE QUESTIONS

18.) Q: Why are the levees in Lancaster, NY being ignored, as if they do not exist?

A: FEMA had determined there is a risk that somehow flood waters will get thru these old levees.

(The Lancaster levees were built by the Army Corp of Engineers in the mid 1940s and do not meet today’s standards. FEMA developed the base flood elevation as though the levees don't exist and the water is allowed to spread to fill the floodplain.  It is true that a levee breech would likely happen at one spot, causing catastrophic damage behind that location and a gradual filling of the floodplain elsewhere.  However, since it is impossible to determine where that failure may occur, the mapping is done as though the entire floodplain has been filled without considering the even greater damage that could occur at the failure point.)


19.) Q: Who is the Lancaster Floodplain Administrator?

A: The Village and Town of Lancaster do not currently have this position filled. These responsibilities usually fall on the building inspector.


20.) Q: Is the Village appealing or protesting during the one-time formal 90 day appeal period?

A: The Appeals and Protest period is from 10/28/10 – 1/25/11. A protest or an appeal must be based on scientific information, such as incorrect elevation, to show the flood insurance study (FIS) is defective. The village has hired an engineering firm to spot check a number of elevations. As of December 2010, no significant scientific basis for appeal or protest has been found.


* Federally regulated lending institutions, federal agency lenders and federally sponsored housing enterprises.