Properties Added to the Special Flood Hazard Area
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- Last Updated: January 12, 2015 January 12, 2015
If your property is moved into the Special Flood Hazard Area (SFHA) (100-year floodplain), and you have a loan on your property, your lender will require you to purchase flood insurance to protect your property. (If you do not have a loan on your property, you may still want to consider purchasing flood insurance to protect your investments.) Lenders across the US are notified when there is a map revision and they are given 45 days to document proof of flood insurance in their files. If you do not purchase flood insurance, your lender is required to purchase it for you or they will be fined for being out of compliance. If your lender has to buy the coverage for you – the rates are significantly higher as your specific building information is not calculated as part of the equation for the quote. It is always better to purchase flood insurance on your own.
For properties that are moving into the SFHA there are ways to manage the costs of floodplain insurance through taking advantage of preferred flood policies and grandfathering rules.
Recommended steps to reduce your flood insurance premium:
Contact your insurance agent now to determine the best approach for your property.
Ask your agent about purchasing a Preferred Rate policy.
Ask your agent about options that might bring your rates down including:
- Elevation certificate (your local land surveyor can complete an Elevation Certificate for you)
Preferred Rate Flood Policies for Properties Added to the SFHA
Since FEMA does not currently consider your property within the SFHA (100-year floodplain) then you can buy floodplain insurance through a preferred flood policy. Preferred policy rates are available for a full one-year policy term as long as it is purchased within the first year after the new flood maps become effective.
Preferred policies are package policies that combine dwelling coverage and contents with set values and rates. The rates are uniform and should never differ from one insurance company to another. Preferred policies can save you a substantial amount of money. See rate examples below.
Grandfathering Rules for Properties Added to the SFHA
If you purchase a flood insurance policy (such as the preferred flood policy discussed on this page), then you will lock in the prior base flood elevation under FEMA’s grandfathering rules. Grandfathering the base flood elevation can have a significant positive impact on your flood insurance rates. You might also use the grandfather rule if you have proof that your home was built in compliance with the flood map that was in effect at the time of construction – talk to your insurance agent. See rate example below.
Flood Insurance Rate Examples
The example below is provided to demonstrate potential flood insurance rates for a typical home in North Albany being moved into the floodplain. The example below includes several different rate scenarios:
1. First Year
Preferred Rate Policy
The preferred rate for a property FEMA currently shows out of the floodplain. This would be the rate structure for the first year of coverage if the property owner purchases a preferred policy within the first year after the changed flood maps become effective.
2. Second Year
Newly Mapped Rate
The preferred rate policy from the first year will roll into a special “newly mapped” rate for the second year.
3. Third Year
Rate with Grandfathered Base Flood Elevation (BFE)
This rate is based on the lowest floor elevation and the grandfathered base flood elevation when an elevation certificate is used for rating.
4. Subsequent Years
When applicable, rates will increase annually at 15-18% per year until the full rate for the property is reached based on a site specific Elevation Certificate and BFE.
Note: Without an elevation certificate or grandfathered base flood elevations homeowners will most likely see much higher rates than those shown in the example. Talk with your insurance agent now to establish a strategy appropriate for your specific situation.
FEMA sets flood insurance rates and they change frequently. For example, Congress and FEMA have revised flood insurance rates five times since 2012. Rates shown in these examples are average rates and may be higher or lower when based on a specific property. Pre-FIRM examples are for structures constructed prior to April 1985 and post-FIRM, for structures constructed during or beyond April 1985.
These examples demonstrate how purchasing flood insurance coverage within the first year after the map revision can help you save money. In addition, having an elevation certificate completed could have a positive long-term benefit on flood insurance rates. It is important to note, however, that the rates provided in the examples were based on a specific home example and will vary with the unique variables of each home as well as the revision of FEMA’s rates. Estimates are provided to give you a general idea of order of magnitude of insurance rates based on your options.
The flood insurance rate illustration below is based on the rates that FEMA has issued effective April 2015, for homes being mapped into or added to a Special Flood Hazard Area for the first time. Due to the complexity of the rates and the multiple changes issued by FEMA it is always advisable that you work with an authorized and experienced agent that writes flood insurance to determine the rate for your specific home.
Rate Example for $150,000 Dwelling Coverage
- 1st Year Preferred Rate Policy = $405 (Pre or Post-FIRM homes)
- 2nd Year “Newly Mapped” rate = $462 (Pre or Post-FIRM homes)
- 3rd Year with Grandfathered BFE = $780 (Pre or Post-FIRM homes) could be less with Elevation Certificate
- When applicable, subsequent years will increase at 15-18% per year until the rates in the table below are reached. An Elevation Certificate can help determine which category you are in and inform what modifications, such as venting, could be made to change your category and substantially lower your rates.
|If your home’s lower elevation is||Rate (Pre-FIRM home constructed prior to April 1985)||Rate (Post-FIRM home constructed during/after April 1985)|
|1 foot above BFE||$454||$454|
|Equal to the BFE||$780||$780|
|1 foot below BFE||$1121||$2585|
|More than 1 foot below BFE||Increases with depth|
- What FEMA considers your homes “lower elevation” to be is dependent on several factors. An Elevation Certificate will clarify which category your home is in and inform what improvements could be made to change your category and reduce your rates.
- FEMA’s insurance rates are site specific, change frequently, and vary widely by value of the dwelling and site specific circumstances. As such, the rates above are for hypothetical discussions only and are not expected to match any one property.