Homeowners who are required, all of a sudden, to carry flood insurance have a way to appeal their property's placement in a flood zone.
The process isn't simple -- not by a long shot. But following it could save you hundreds, if not thousands, of dollars, especially since premiums under the federal National Flood Insurance Program (NFIP) keep getting bumped up.
First, a little background.
The Federal Emergency Management Agency (FEMA) recently remapped most of the country using 100-year flood plain projections. The result was that many homes were placed into flood zones that never before existed, despite the fact that many of them had never (or rarely) experienced flooding.
The bottom line: If a house's mortgage is touched by the government in any way -- insured by the Federal Housing Administration, backed by the Veterans Administraion or purchased by Fannie Mae or Freddie Mac -- borrowers are now required to carry flood insurance. And some lenders now require coverage, no matter what.
Flood insurance is not a bad thing. Indeed, damage from flooding is costly: The average flood claim to the NFIP is $30,000. Flooding is the nation's most frequent natural disaster, and it's not always associated with hurricanes or broken dams. Floods can happen from busted pipes and torrential rains, and they occur in all 50 states.
Consequently, many borrowers elect to buy coverage, even if their lenders don't demand it. But if you don't want it and it isn't necessary, you shouldn't have to pay for it. And you may not have to, if you follow the steps set up by FEMA to appeal your flood zone designation.
To appeal your home's placement in what officially is called a "Special Flood Hazard Area," you must show that the lowest adjacent grade, or the lowest ground touching your home, is at or above the "base flood elevation." That's the elevation to which floodwater is projected to rise during a so-called "100-year flood," also called a "base flood."
Remember, though, the term "100-year" is something of a misnomer. It doesn't mean that a major flood happens once every 100 years. Rather, it means that the area has a 1 percent chance of flooding every year. Another name for it is the base floodplain.
Wow! And understanding all that is just the beginning of the process.
To start, you have to submit a request to FEMA for a Letter of Map Change, which, according to FEMA, "reflects an official revision/amendment to an effective Flood Insurance Rate Map." The map is said to offer much useful information and represents the official depiction of flood hazards for your community.
All of this is outlined on the FEMA webpage at fema.gov/information-homeowners, where you can start the step-by-step process and find out what supporting documents you might need. Follow the detailed instructions to ensure that your request is complete and logically structured.
Meanwhile, bipartisan legislation intended to remove barriers to the development of a private market alternative to Uncle Sam's program has cleared a key House committee by a resounding 53-0 vote.
"In many cases, we have found comparable private flood coverage is much less expensive than the NFIP product," according to Pennsylvania Insurance Commissioner Teresa Miller.
Currently, only a few carriers -- most notably, Lloyd's of London -- offer flood insurance, primarily because many lenders are unsure if private coverage meets government requirements. Also, private companies may not cover higher-risk properties, leaving the NFIP as the only choice in those cases.
Another drawback to the development of a private market is that borrowers who switch to a private policy and then decide to return to the government's program will probably not be eligible anymore for any rate subsidy they enjoyed with the NFIP previously.
The bill by Florida representatives Dennis Ross and Patrick Murphy would require lenders to accept private coverage if it complies with state laws and regulations and includes the required limits of coverage. Acceptable policies would have to be issued by a company that is licensed, admitted or otherwise approved by the state in which the property is located.