Flood insurance rate maps (FIRMs) are periodically updated. Those changes can dramatically affect your flood insurance rates.
Part 4 of a 4-part series: Part 1 Part 2 Part 3 Part 4
As you saw previously in our series on flood insurance, the flood zones as defined on the official Flood Insurance Rate Maps (FIRMs) are a huge factor in determining flood insurance rates. Be aware that FIRMs are periodically reviewed and updated. Doing this is a long and complex process, in which scientists study the elevation and topography of the land, the adjacent bodies of water, manmade developments, etc. All this produces (hopefully) a map which indicates the likelihood of flooding in any given area. Flood maps and flood zones are very controversial, because sometimes it seems that areas which have never flooded are considered high risk zones, and vice versa. Nevertheless, the federal flood maps are the official standard used.
Since these maps change periodically, that means the flood zone designation for a given location can also change. This can be a good or a bad thing. It is possible that a house which had been in a high risk zone is now located in zone X on the new map. More often, it seems that the opposite occurs. A house which may have been in flood zone X for years could suddenly fall into zone AE, meaning flood insurance would be required. This happened to our own house with the new Livingston Parish flood map which came out in April 2012. However, since we already had a policy in place, we are allowed to keep it and receive the preferred (low-risk) rate, at least until the government changes its mind.
The flood map shown here is for a portion of north Walker. White areas are flood zone X; blue areas are the high risk zones (AE) according to the 2001 flood map; red areas are the current high risk zones from the 2012 map. Note how some areas improved while others got added to the high risk zones.
When flood maps change, the base flood elevation (BFE) for a particular area can also change. If it is determined to be higher than it was before, that can have a massive impact on the cost of flood insurance. As we discussed in part 3, rates are determined by how high (or low) a house lies relative to the BFE. If a house was at +2, and the new map raises the BFE by 2.5’, the insurance would go from a few hundred dollars a year to a few thousand!
When a home is reclassified as being in a high risk flood zone, the lender will require the owner to purchase a flood insurance policy if there is not already one in place. Currently, they are allowing such homes (like ours) to either continue or purchase a policy at the preferred rate, as long as certain requirements are met. Click here for details. This is a special form of “grandfathering.”
Other types of grandfathering are currently allowed. Owners of houses built before a FIRM existed for that location can elect to pay a “pre-FIRM” rate instead of getting a flood elevation certificate and paying the standard rate based on that elevation. Houses which were built above grade at the time of construction (builders are not allowed to construct homes which lie below the base flood elevation) but whose elevations are later changed on new flood maps can also receive a grandfathered rate. Grandfathering is a good, sometimes absolutely necessary, choice for homes which otherwise would have very high standard rates.
Unfortunately, grandfathering has, at least for now, come to an end! The Biggert-Waters Act was signed into law and took effect in October 2013. The short version is that the federal government has discontinued all forms of grandfathering for flood insurance! No matter how high it would make the cost for the homeowner, they want all flood insurance policies to be based on standard rates and elevations. Many people are in an uproar about this. Homeowners in some areas are being told that their policies are soon going to cost tens of thousands of dollars per year! If fully implemented, this will be a catastrophic blow to a lot of homeowners, as it will make their homes unaffordable for themselves along with anyone who might want to buy them. This is an impending disaster.
In our opinion: With Biggert-Waters, the federal government is pulling the rug out from under hardworking American homeowners. We can understand them not wanting to keep paying out billions in flood claims on risky properties. However, we believe they should not have gotten into the insurance business in the first place! Now that they are though, they should honor the promises they made on existing homes. If they want to avoid insuring high-risk properties, they should do so from here on out, but NOT penalize homeowners who trusted them to provide the coverage they promised.
- ALWAYS CARRY FLOOD INSURANCE ON YOUR HOUSE, REGARDLESS OF FLOOD ZONE! WE CANNOT STRESS THIS ENOUGH.
- If you are planning to buy a house, look CLOSELY at flood zones. We are extremely careful about this when working with our buyers, as it is a very important factor, especially today.
- If you get a house under contract, be sure to ask your insurance agent to check it for any prior history of flooding. Past flood claims on a house may cause new claims to be denied!
- Keep abreast of the Biggert-Waters Act, and the current efforts to modify or block it. Though it may not affect you right now, remember that flood maps change, and those changes, along with provisions of the Biggert-Waters Act, could someday apply to you.
The uproar about Biggert-Waters, and its potential impact on housing, were so bad that Congress had to pass the Homeowner Flood Insurance Affordability Act (HFIAA) in 2014. This law rolled back much of Biggert-Waters, and perhaps most importantly, restored grandfathering. This means that a house properly built to the flood standards effective at the time of construction can remain rated by those standards (such as elevation and zone) even if the maps change. HFIAA also enforced accountability on the NFIP, and set an absolute cap on residential rate increases of 18% per year.
Here is an excellent summary of Biggert-Waters and HFIAA as presented by the National Association of Realtors.
NOTE: As we have stated many times, we believe carrying flood insurance is critical, even in X zones! As you saw, our former house in St. Bernard was completely flooded by Katrina. It was in an X zone, and we had elected to carry maximum flood coverage. For a cost of $317, we were saved from financial ruin. (That same policy today is only about $450.)
ANOTHER REASON TO CARRY FLOOD INSURANCE IS THAT IF IT LAPSES, THE PROTECTIONS OF HFIAA WILL NOT APPLY!
Many of the provisions for grandfathering etc. are only allowed when continuous coverage has been maintained. For example, if you were in an X zone without coverage, and a new map change rezones you into AE at a low elevation, your policy will be rated by the new standards. The fact that it was previously an X zone will not count at all!
We are a prime example. We bought our house in Walker in 2005. At the time, it was in an X zone, and we purchased maximum coverage which we have kept continuously in force. When the map changed in 2012, the line between X and AE now cuts through 1 room of our house, so technically we’re in zone AE now. However, because we have maintained continuous coverage, we still pay the X rate.
Following the 2016 flood, issues with regard to flood insurance are more important than ever! Be sure to subscribe in order to get our updates, both here and on Facebook as well.