FLOOD ZONE INSURANCE
UNRAVELING THE HOMEOWNER AND ASSOCIATION’S PUZZLE

By Howard Willis

I have received a number of calls from customers and neighbors asking for help in understanding what the law is on flood insurance, what can mortgage companies require, and is there a way to eliminate it to obviously save money.  Hopefully this article will give you an overview and an understanding of flood insurance, how you may be affected and how you might potentially save thousands of dollars in unnecessary expense.

First Some Background

In 1968, the U.S. Congress created the National Flood Insurance Program (NFIP).  Their intent was to reduce future damage and to provide protection for property owners from potential losses through an insurance mechanism that allows a premium to be paid by those most in need of protection. FEMA (Federal Emergency Management Agency - the government body that oversees the National Flood Insurance Program) produces Flood Rate Insurance Maps (FIRM’s) that show areas subject to flooding. The flood risk information shown on the maps is a result of a number of factors like historical flooding, development changes, hydraulic data, open-space conditions, etc.

Flood maps allow homeowners, developers, insurance and mortgage companies, and governments to identify special flood hazard areas.  FEMA conducts flood risk studies to identify flood risk areas known as 100-year flood zones.  100-year flood does not mean it’s a flood that occurs every 100 years. It actually means that the area has a 26% chance of flooding within a 30-year period, which is the length of many mortgages.  The 100-year flood maps are what insurance companies use to manage their insurance programs and pricing.

Sounds Like a Tax We Don’t Need to Pay

“Many homeowners and commercial building owners are being forced to buy flood insurance,” states Dan Freudenthal, President of Flood Zone Correction, Inc. “We've found that 90% of them should be able to choose a level of coverage that best meets their needs and budgets instead of an amount dictated by their mortgage companies.”

Throughout the United States, many low flood risk property owners are being required to pay for high flood risk coverage. Flood insurance requirements imposed by mortgage companies are reasons the vast majority of American homeowners and businesses paid approximately $1.8 billion to maintain more than 4.5 million flood insurance policies in 2002.  In 2002, Weston had 5,871 homeowner policies amounting to more than $1.8 million, or an average annual policy cost of $319.  How many of these homeowners really needed to pay this?  If a homeowner has a say 20-year mortgage, that average amounts to more than $6,300!  

Get a Flood Zone Analysis

The experts say homeowners should get a flood zone analysis.  Getting this analysis is a bit of a challenge. There are for-profit companies that will do this analysis at no up-front fee to the homeowner, using a contingency fee approach to collect a one-time fee based on the annual insurance premium if in fact they can get the home off the high-risk flood classification.  There are a variety of classifications that properties fall into.  Homeowners can learn a lot at no charge by logging-on to FEMA.org and reading about flood mapping. 

Condominium Owners Are Also Paying

Mortgage companies are requiring condo owners to provide proof that the association maintains flood insurance or to purchase their own policies, because the mortgage companies believe that your condominium buildings are located within a Special Flood Hazard Area (SFHA). If your association or unit owners purchase flood insurance through the National Flood Insurance Program (NFIP) and have not filed any flood claims in the current policy year, successful flood zone correction could entitle your association and unit owners to a refund of 100% of the premium for the current year.

The Solution: Get Yourself a Flood Zone “Correction” to Obtain a “LOMA”

Successful flood zone “correction”, assuming you are now expected to pay flood insurance, will allow you the single-family or condo unit owner, to choose an amount of flood insurance that meets your needs and budget.  A home or building that does not have a history of flooding and that meets criteria set forth by FEMA will qualify for a LOMA or LOMR.

What is a LOMA or LOMR? A Letter of Map Amendment (LOMA) or Letter of Map Revision (LOMR) is a final flood zone determination that is issued by FEMA after performing a detailed analysis of the flood risk associated with your home or building. FEMA issues a LOMA or LOMR to remove your home or building from a high-risk flood zone (Special Flood Hazard Area “SFHA”) and put it into the correct flood zone, which is always a low-risk flood zone where flood insurance is not required.

For more information, feel free to visit us on our website to request more specific information.

* Sources: FEMA; Flood Zone Correction, Inc. “

Howard Willis, J.D., Realtor is affiliated with Esslinger–Wooten–Maxwell Realtors. He and his wife Allegra reside in Weston where they specialize in providing real estate services to premium and luxury homeowners.  You can learn more at www.thewillisgroup.com or contact Howard at (954) 949-0444, or howard@thewillisgroup.com