Don’t need flood insurance? Better check your plain

Business

Flood policies can transfer

Similar to a termite bond, flood insurance also can transfer with a property title to the next owner. Assuming no lapses, a policy can be “grandfathered” to the home. According to Jeff Stoneking of Brightway Insurance, that transfer can occur with the cost based on the flood zone rating of the home at the time the policy was issued.

For example, if a property initially insured while rated in flood zone “X” — a lower-rated zone —and its designation changed while covered to “AE” — a higher-rated zone — as long as there was no lapse in the flood policy, that property would still be rated in the “X” zone for flood insurance purposes.

Flood insurance usually covers the contents of a home, although there is an option to exclude it. Also, there are two deductibles with a flood policy — one for the dwelling and one for the contents. If a flood claim carried a deductible of $1,000, the homeowner would pay $1,000 toward the dwelling deductible plus $1,000 for the contents deductible.

While watching continuous TV coverage in advance of Hurricane Irma, Jeff Stoneking repeatedly heard what he describes as a significant misconception regarding flood zones in Northeast Florida.

Stoneking, agency owner of Brightway Insurance on Baymeadows Road, said the news reports reinforced his concern that those that didn’t suffer flood damage might be lulled into a false sense of security.

“Everyone in Florida is in a flood zone,” Stoneking said. “The evacuation map just tells you what flood zone you are designated in and whether you are required to leave.

“The difference between what happened in Houston is they got 50 inches of rain there and we got 12 inches here.”

The allure of living on the beach, near the river or along creeks comes with inherent risks. Mortgage companies will finance new and existing homes in those areas, but only if the buyer or owner has received an elevation certificate from the Federal Emergency Management Agency and secured flood insurance through the National Flood Insurance Program, which is backed by the federal government.

Federal law requires all federally backed lenders to determine if a house considered for a loan is in a flood plain. If so, the borrower is required to secure flood insurance on the property in advance. As part of the loan process, a lender will order a flood certification to determine if the property is in a flood plain, defined as an area exposed to a 100-year flood, or 1 percent annual chance of a flood. This is called a Special Flood Hazard Area.

In Duval County, these regulations also apply to substantial improvements to a building, as defined by the value of an addition, alteration, repair or reconstruction project exceeding 50 percent of the value of the existing building. In this case, the improvement is treated as a new building in a flood-risk area.

For an addition, only the new structure must be protected. For significant improvements to an existing building, the entire building must be protected according to NFIP standards, meaning flood insurance is required even if a policy is not currently in force.

FEMA manages the flood insurance program and publishes the flood plain maps. The NFIP is the underwriter for all the basic flood insurance policies and pays all the claims.

Not always high and dry

The owners of homes not in what is generally regarded as flood-risk areas are those who concern Stoneking. A slow moving or stationary storm, he said, could impact any part of Florida just as Harvey did Houston and other regions of the western Gulf of Mexico coast.

Flood-damaged furniture and other items line the streets in San Marco, which suffered flooding from Hurricane Irma. The contents of a home are usually covered by flood insurance, but it will carry a separate deductible.

FEMA and state and local agencies won’t prohibit new construction, renovations or additions in flood-prone areas, but they won’t come without a cost. Flood insurance rates vary based on the height of the base of the home — any structural or mechanical level — relative to base flood elevation.

A home at 6 feet of elevation in a base flood 5 zone is 1 foot above the 100-year flood level. A home at 4 feet is a foot below that level.

The difference in cost for flood insurance between the two could be staggering, Stoneking said. Depending on the home value, the potential severity of flooding and its base flood elevation in a high-risk flood area, Stoneking said the cost could range from $500 to $5,000 annually.

By comparison, flood insurance on a $250,000 house in an “X” Zone, or a “preferred flood zone,” will cost about $450 per year.

“As long as the homebuyer has flood insurance, the mortgage company is fine with it because the homeowners’ insurance covers the risk for wind and for anything else, but FEMA is taking responsibility for the flooding,” Stoneking said. “It’s not a difficult process, but if somebody is at a higher risk for flooding, they will have to get an elevation certificate from FEMA.”

Stoneking said in an average week, his office writes about 25 homeowners policies. As Irma was approaching, it wrote 40 policies, 35 of them for flood insurance. The new policies won’t cover damage from Irma because they require a 30-day waiting period. In all, he estimates 20 to 25 percent of his homeowners policy customers carry flood insurance.

“Probably not enough,” Stoneking said.

He said homebuyers in higher-risk flood zones should consider securing an elevation certificate on their own “before going any further” with the purchase of a new or existing home to understand their potential insurance costs.

“If you are looking at a home that might be a flood risk, call your insurance agent first to see if it is in a flood zone,” Stoneking said. “It only takes a few minutes for them to look that up.”