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What the New Flood Insurance Maps Mean to You

Is your property at risk of damage from flooding? If you answered “no,” think again. Every property has a flood risk; some may have a more severe risk than others, but all have some risk. A home on a lakeshore has a pretty obvious exposure to flooding. So, however, does a building miles from a body of water, located on a street with storm drains on it and a steady water supply. Because standard homeowner’s and commercial property insurance policies do not cover flood losses, the federal government makes insurance available through the National Flood Insurance Program. The NFIP evaluates the risk (and determines the insurance premium) for each property in a participating community according to its location on that community’s Flood Insurance Rate Map. Recently, those maps have been changing, and some property owners have received big surprises.

For a variety of reasons, the Federal Emergency Management Agency, which administers the NFIP, has spent the past several years working with participating communities to update flood maps. Some areas have experienced development that has changed water flow and altered drainage patterns. Soil erosion has impacted other areas, while changes in hurricane activity have affected coastal areas. The new digital maps give more accurate flood risk information on a property-by-property level.

For every property, the flood map changes will produce one of three outcomes:

* The risk level changes from low or moderate risk to high risk;

* There is no change in the risk level

* The risk level changes from high to low or moderate.

According to the NFIP, a low or moderate risk means that the risk of flooding is reduced but not completely eliminated. Such properties are still vulnerable from floods resulting from heavy rainfall, rapid snowmelt, clogged storm drains, and other causes. Properties with a high risk have at least a one percent annual chance of flooding. This means that a property with a 30-year mortgage has a one in four chance of flooding sometime during the life of the loan.

When the NFIP issues new maps, it normally provides a six- to twelve-month period before the new maps take effect. This gives affected property owners time to understand the changes and prepare for their effects.

If your risk level has changed to high, the federal government will require your mortgage holder to verify that you have bought flood insurance. The cost of insurance will increase to reflect the higher degree of risk. The NFIP has “grandfathering” rules to help property owners who built in compliance with the maps in effect at the time of construction or who have maintained continuous flood coverage on the property. This can offset some of the additional cost. The owner of a building that is sufficiently high above the minimum height at which a flood is likely to occur may actually see a premium reduction.

If your risk level has changed to low or moderate, federal rules will no longer require you to buy flood insurance. However, you will still have some risk of flooding, so it may be wise for you to retain the coverage. According to the NFIP, 25 percent of flood insurance claims come from properties with low or moderate risks. You may be able to convert your standard flood policy to a Preferred Risk Policy, which carries a lower cost.

Even if your risk level has not changed, you should discuss your situation with a professional insurance agent, who can suggest ways for you to protect yourself financially from flood losses. The NFIP says that flood is the most common natural catastrophe in the U.S. The time to prepare is before that flood occurs.