How do flood map changes affect flood insurance costs?
The flood maps changes in many Massachusetts communities means your flood risk may become higher or lower. This will affect what you pay for flood insurance.
Flood maps have become more accurate over the past several years as mapping technology has improved and Congress has determined to transition away from highly subsidized rates.
Here are some scenarios that explain different flood map changes:
Scenario 1: If the flood maps change from a low or moderate risk to high risk (flood zone B, C, or X) to zone A, AE, AR, A99, AH or AO).
These requirements and options apply to Scenario 1 according to the National Flood Insurance Program:
- Flood insurance is mandatory for most mortgage holders. Insurance costs may rise to reflect the true (high) risk.
- The Preferred Risk Policy (PRP) Eligibility Extension Program can offer savings. To ease a homeowner's transition from a moderate-to-low risk area to a high-risk area, which would require the mandatory purchase of flood insurance (if you have a mortgage) and an increase in flood insurance costs, the National Flood Insurance Program is extending eligibility for the lower-cost Preferred Rate Policy to properties that were remapped on or after October 1, 2008.
- "Grandfathering" can offer savings, but is changing from the 'good old days' when you could lock a highly subsidized rate. The National Flood Insurance Program has rules to recognize policyholders who built in compliance with the flood map in effect at the time of construction or who maintain continuous coverage. Sometimes, though, using the new flood maps can actually result in a lower premium, especially if the home is high enough above the Base Flood Elevation (BFE). In addition, buildings newly mapped into a high-risk area may be eligible for the lower-cost Preferred Risk Policy (PRP) for two years after a map change, before they grandfather in the lower-risk zone rates.
Scenario 2: The flood maps show a change from high flood risk zone to a low or moderate risk (flood zone A, AE, AR, A99, AH, AO to X or shaded X)
These requirements or options apply:
- Flood insurance is optional but recommended. The risk has only been reduced, not removed. Flood insurance can still be obtained, and at lower rates. Even though flood insurance isn't federally required, anyone can be financially vulnerable to floods. People outside of high-risk areas file over 20% of NFIP claims and receive one-third of disaster assistance for flooding. When available, disaster assistance is typically a loan you repay with interest.
- Conversion offers savings. An existing policy can be easily converted to a lower-cost Preferred Risk Policy if the building qualifies. Note that lenders always have the option to require flood insurance in these areas.
Scenario 3: The flood maps show an increase in the Base Flood Elevation (BFE).
These requirements or options apply to scenario 3.
- An increase in BFE can result in higher premiums; however, "grandfathering" can offer savings. The National Flood Insurance Program grandfathering rules allow policyholders who have built in compliance with the flood map in effect at the time of construction to keep the earlier base flood elevation to calculate their insurance rate. This could result in significant savings.
Scenario 4: No change in flood zone risk level .
These requirements or options apply.
- There may be a change in insurance rates. Higher rates apply to secondary homes, homes with severe repeated losses, and business property. It is still a good time to review your amounts to ensure that your building and contents are adequately protected.
Our agency www.agordon.com is happy to assist with securing or reviewing flood insurance coverage.