Flood Insurance Update

Flood Insurance Update

Greetings!

You have undoubtedly heard that the flood insurance maps have been redrawn and that rates in most cases are increasing. Getting reliable information has been difficult and frustrating, but there are resources available. Although there are still unanswered questions, here is some information you may find helpful.

The new maps are available here. (There's a zoom tool in the bottom right corner to find specific streets.)

It's my understanding that individual properties cannot be appealed. Instead, the appeal process is to change an entire area of a flood zone. If you think your property was wrongly included within a flood zone, the process is to file a LOMA (Letter of Map Amendment) to see if your property (or usually only your house) will be removed from the flood zone.

The increase in rates is partly because of the elimination of a subsidy that has been in place for years. This is a stepped process over a number of years, so rates for a current homeowner will continue to be less than for a new homeowner.

Rates for primary residences and secondary residences are different, with the latter being higher. However, some local banks (see Patti's contact info below) have a portfolio arm at 90% financing that has the same rate for first or second homes with no mortgage insurance and starts at 3.375% 7/1 arm.

Flood insurance is mandatory only with conventional financing. In other words, it's not compulsory for homeowners without mortgages. I wouldn't be surprised if new homeowners buying property in a flood zone reallocate their financial resources so that they do not take out a conventional loan, and therefore will avoid the need for flood insurance. Banks can look at using equity on other properties to buy on the Cape if the property is in a flood zone and the homeowner doesn't want flood insurance.

There are ways to mitigate the property if it is in a flood zone (i.e., filling in a basement, raising the house on stilts, adding openings to allow water to flow through, or adding fill to raise the base level of the home). Although expensive - any of these could cost $60,000 - if flood insurance is $10,000 a year, in six years it's paid off, with no additional cost to the homeowner.

Flood insurance caps for structure replacement at $250,000, or the amount of the loan if it's under $250,000.

Obtaining an elevation certificate from a State-licensed surveyor is strongly recommended prior to listing a home for sale. If you have an elevation certificate prior to 2013, it will no longer be accurate.

Quote from a FEMA Fact Sheet: "You could save more than $90,000 over 10 years if you build 3 feet above Base Flood Elevation." The hypothetical premium for $250,000 building coverage at 4 feet below BFE is $9,500 a year. Multiplying that times 10 years is how FEMA arrived at $90,000.

Call on your trusted professionals to help you determine your best option: your insurance agent, your loan officer, or your surveyor.

I attended a seminar this week at which the following professionals spoke. They are well-qualified and would be happy to speak with you:

Thomas Bunker, BSS Design - (508)540-8805, tom@bssdesign.com