By Chuck Chase, CFM
In the last newsletter we had an article addressing the newly mapped procedure and an upcoming deadline for your citizens whose homes had been newly identified in the SFHA since October of 2008. The application of the newly mapped procedure to a community getting new maps in the future is still a pertinent subject.
When new Flood Insurance Rate Maps (FIRMs) are created, we may discover a property is actually at a higher risk of flooding than previously determined. In this case, the owner may wish (or be required by his mortgage institution) to purchase flood insurance. Two avenues can be used in conjunction with each other or individually to provide insurance premium savings to the owner.
Let us assume an X zone property has, with the new map, now been determined to be in an A zone of some type. They can purchase a preferred risk policy (PRP) now and be eligible for a standard X policy (sometimes called standard grandfathered policy) and be locked into a potentially lower rate; this is called the “continuous coverage provision.” This provision requires the policy to be in effect before the new maps become effective. The Standard X policy can be half the cost of a normal policy for someone who builds in a floodplain.
A property owner can also get the grandfathered rate anytime; even several years after the new maps become effective, by showing the structure was either built in compliance with the maps in effect or in compliance with the Base Flood Elevations at the time of construction. This is called “built in compliance.” This does not apply to pre-FIRM homes. Homes built before the community’s first FIRMs became effective (pre-FIRM) by definition were not built having to comply with a map. To lock into a standard X rate pre-FIRM homes should get coverage before the new maps become effective to utilize the continuous coverage aspect of the standard X rate.
The Newly Mapped Procedure
With the newly mapped procedure, the home owner has a year after the new FIRMs become effective to purchase flood insurance at the rate available before the new map. Thereafter, the insurance premiums will gradually increase until it reaches the actuarial rate, which could be the Standard X rate mentioned above. The insurance is to not go up by more than 18% per year.
If a house is pre-FIRM, the homeowner can still take advantage of the newly mapped program after the maps have become effective during that first year. Yet, as mentioned above, they have forfeited their grandfathering opportunity. Their rate will continue to increase (no more than 18%) until it reaches the full actuarial rate for the A zone they have been mapped into. If a person owns a pre-FIRM home it is therefore important for them to get coverage before the new maps become effective (continuous coverage clause) in order to take advantage of both grandfathering and the newly mapped procedure.
Insurance agents should already be aware of these programs. Yet, your community looks to you, the floodplain administrator, as the floodplain expert for your community. A basic knowledge of these programs is a good tool to have in your toolkit.