If you live in Alabama, flooding might not be new to you however these flood events still surprise homeowners across the state. So you might be wondering, how can I fight these flood risks that I face especially in Birmingham, Alabama in Jefferson County, and Shelby County.

In this article, we take a look back at how this flood event of October 2021 impacted flood insurance in Birmingham, Alabama.

The Birmingham Flood of October 5th

On October 2nd and 7th of 2021, Central Alabama was met with off-and-on heavy rains and storms. This is when around 6-10 inches of rain was dumped on the area causing widespread flooding. The Birmingham area alone received at least 4 inches of rainfall with central Birmingham receiving more than 6 inches of rainfall. This immediately led to flash flooding in the area.

The flooding caused a total of 66 emergency calls between October 6th and 7th which lead to 16 water rescues from flooded properties and stranded vehicles. Sadly, this flood event also caused a total of 4 fatalities in Marshall and Shelby Counties.

In less than 3 days, Central Alabama was easily ravaged by this flood event. So how did this flooding impact flood insurance for Alabama?

The Impacts of the Flood of October 2021

For those who have active flood insurance policies, regardless of whether it's from the National Flood Insurance Program (NFIP) or private flood insurance companies, this flood event meant filing flood claims. You might be wondering, how will these insurance claims ripple into the present day.

NFIP Risk Rating 2.0

First, let's discuss what this could mean for policyholders of the National Flood Insurance Program (NFIP). When it comes to the NFIP especially considering that this flood event already was when Risk Rating 2.0 first went live. If you filed a flood claim and got payment from the NFIP due to this flood event, this could impact your flood insurance premium rates.

This is because Risk Rating 2.0 uses a claim variable wherein your previous flood claims will be forgiven. However, once you file a flood claim, the Federal Emergency Management Agency (FEMA) and the NFIP Risk Rating 2.0 will do a 20-year lookback. This means that you will be rated on how many claims you have made in the last 20 years and it gets included in the calculation of your flood insurance premium upon renewal.

Private Flood

On the other hand, a private flood might also present some unpleasant situations upon filing a flood insurance claim. Some flood insurance carriers might stop providing to your community or also known as moratoriums. Equally, if moratoriums won't happen in a specific community, policyholders might find it difficult to renew their flood insurance policy. 

This also means that if you get to renew your flood policy, you might see an increase in your flood insurance rates.

You may be asking, does paying off my mortgage lower the cost of flood insurance for me?

Mortgage & Flood Insurance

Sad to say, paying off your mortgage will not really impact the cost of flood insurance for you. This means that you won't see any decrease in flood insurance costs. Regardless if it's an annual or monthly mortgage payment, it won't really have any influence on your flood insurance rates.

This will, however, impact flood insurance requirements. Keep in mind that even if you're in a low-risk flood zone, your mortgage or lender may require you to buy a flood policy for the property. This is especially true for properties that sit in high-risk areas. High-risk flood areas include properties that are mapped into Flood Zone A, Flood Zone AE, or the Special Flood Hazard Area (SFHA).

This doesn't mean that you shouldn't buy flood insurance even if you're in a low-risk area or flood zone like Flood Zone X. Remember, 30% of flood insurance claims from these zones. 

If you want to know your flood insurance options, how to handle your flood insurance in Birmingham, or anything related to floods, click below to go to our Flood Learning Center where we try to answer these questions for you.

 

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2020 has been a year that no one will ever forget. There are three things we want to look at in 2020 and how they could impact the future of coastal private flood insurance.

1. Covid
2. Social Injustice
3. Hurricanes

 

                                                           Covid

When Covid hit in March of 2020 it caused many businesses to come to a crashing halt.

The hospitality industry has basically been non existent and you couldn't pay someone to get on a cruise ship. Airlines are barely surviving. As this happened businesses turned to their insurance companies for coverage.

However many were surprised to find out that most insurance policies don 't cover this type of disaster. Government put pressure on insurance companies to provide coverage. However its difficult to provide insurance coverage when a premium was not charged for a risk.

As these businesses started to close they started to cancel their policies. This started to impact insurance companies as businesses were no longer needing insurance for a closed business. While this was a minimum impact on the bottom line when you add the next two things it creates a major problem.

 

                                 Social Injustice

2020 has seen the rise of social injustice and unrest across many parts of the country. Portland Oregon has seen many businesses burned and even Atlanta Georgia saw businesses damaged after a man was killed in an altercation with police. 2020 was problem the first time in 50 years that you have seen moratoriums put in place by insurance companies for selling business insurance.

At one point Target had to close its Minnesota stores because of looting.

 

                                                Hurricane Season

Now onto the third maybe the biggest thing to impact insurance companies in 2020. The 2020 hurricane season was predicted to be busy but no one predicted it to be this busy. In fact NOAA has had to make several adjustments to their hurricane predictions for 2020.

As we write this blog at the end of October in 2020 we have had 27 named storms, 11 hurricanes have made landfall in the U.S. and 5 hurricanes have made landfall in Louisiana.

This ties the record for most landfalls in a year within one state. Florida set the same record in 2005.

Hurricane Sally, Marco, and Delta have all created major damage in the gulf states. In fact Delta and Sally made landfall only 15 miles a part.

Like most people in 2020 insurance companies are eating through their reserves fairly quickly and they are discovering that many of their risk models were off.

So what does this mean for coastal states like Florida, Alabama, Mississippi, Louisiana, and Texas.

In Mississippi we are already seeing some private carriers halt business completely and we have seen this in Louisiana for a few years. Texas has also had this issue since Harvey.

We could see this pattern start to work its way towards Florida and Alabama.

Does this mean flood insurance will not be available?

No

The National Flood Insurance Program is available for properties where communities participate. It just means that the private flood insurance options could be limited for a while.

This will be a crucial time for you to work with an insurance agency that can defend your risk?

What does this mean?

This means being able to show how a risk may have changed because of mitigation efforts even if it has flooded. We see customers rejected everyday because someone did not defend their property correctly.

If you have questions about what your flood insurance are in these areas then click here. You can also check out our

where we do daily flood education videos. You can also check out our

Remember we have an educational background in flood mitigation. This means we are here to help you understand your flood risks, flood insurance, and mitigating your property.

 

It's the question that gets asked probably a hundred times a week. Insurance agents, property owners, and even banks want to know the answer.

Everyday we see FHA loans fall apart because of flood insurance. Many times flood insurance through the National Flood Insurance Program can be higher. Then you might have to pay the cost of an elevation certificate.

In 2019 FDIC made a major move in the industry when it started to allow private flood insurance.

People assumed this meant FHA would start accepting private flood insurance. However, because FHA insures loans they have different guidelines they do not accept private flood insurance. As of July 2022 FHA still only allows flood insurance through the National Flood Insurance Program, but hopefully, that will be changing soon.

On November 10, 2020 FHA made an announcement they were looking at accepting private flood insurance. They opened up a 60 day comment period for people to leave comments on this possible action.

So what happens next and what will be the impacts?

 

What's Next

After this 60-day comment period FHA will look at the comments and probably make a decision by the 2nd quarter of 2021. If they decide to approve it then they would probably delay it going into effect by 6 months. This is what FDIC in 2019.

So what could the impacts be?

 

The Impact

Well if you currently have an FHA loan then these could possibly cause a major decrease in your mortgage payment. You might see a 40% rate decrease in the private market.

 

However if this is passed don't go and try to jump to the private market right away.

FEMA has strict guidelines for cancellation. Unless you are refinancing your house you may not qualify until your policy is up for renewal.

 

In 2019 we saw a lot of people lose money because of FEMA cancellation rules. Many times private carriers require payment up front and charge minimum earned premiums.

This means you might be out 25% of the money you paid for a private policy because FEMA won't let you cancel.

 

We will continue to monitor this situation and continue to educate the public as this process moves forward. If you have questions about your flood insurance options then click here.

Want to learn more about flood insurance?

Check out our YouTube channel and Podcast.

Remember we have an educational background in flood mitigation which means we are here to help you understand flood risks, flood insurance and mitigating your property long term.

 

Flood zone AE also referred to as the 100 year flood zone has the highest premiums other than coastal areas. These are generally because most of the structures have a negative base flood elevation. So what determines the premiums of these zones?

Well there are a few things that have a major impact on flood premiums in these zones. The age of the structure, the foundation type, flood loss history, and the elevation of the home.

Let's start with the age of the structure depending on when the house was built it will have a different rating model through FEMA. Its based on the first flood map for structure which generally occurred after 1978. If it was before the first flood map its called a PreFirm structure and if its after the first flood map its called a PostFirm structure. One of the big differences between these two types of structures is called grandfathering where you can keep the property in a preferred flood zone that no longer exists. This is allowed on PostFirm structures but not PreFirm structures.

The next thing that has a major impact on flood insurances rates in flood zone AE is the foundation type. Let's start with crawlspaces above grade compared to subgrade. Above grade is a crawlspace that sits above ground and subgrade is going to be crawlspace that sits partially below ground. The big difference here is subgrade generally will sit a certain level below the base flood elevation which increase the premium. While above grade sits above ground it could still be below the base flood elevation. The difference is things like flood vents can significantly lower the premiums with above grade crawlspaces.
The next type of foundation that will have a major impact on premiums are basements. As you can imagine basements can sit a good distance below the lowest adjacent grade creating a significant negative elevation. This can have a big difference on the rate so its very important to understand this when owning a house and purchasing a house. Also just because a basement is below grade does not mean that it is below the base flood elevation. Now that we have talked about foundations lets talk about how the elevation of the home in a flood zone Ae can impact the rate.The only real way to know this is to have a survey or elevation certificate completed. Now that we have discussed how the elevations of a home can have a major impact on flood insurance rates as you can see from the different foundation types.

Lets talk about positive elevations first and how they can have a big impact. The further your home is above the base flood elevation the better the rate is going to be. If all the elevations of your home are above the base flood elevation your home might even qualify for a letter of map amendment. This means that your property might be removed from the high risk flood zone and placed in a low risk flood zones causing a big improvement to property values. Now lets talk about the impact of negative elevations. As mentioned above basements can cause a home to have an extreme negative elevation. The higher the negative elevation a home has the higher probability of a flood occurring. This can create a double edged sword because the NFIP rates can be through the roof sometimes exceeding $10,000 a year for non coastal properties. However the other problem is the higher the negative elevation the less likely that a private insurance carrier will offer coverage on a property. So these are some things to think about when buying a home with a basement or building a home. we have discussed the impact foundation types can have on a structure lets talk about flood loss history.

Flood losses can have a major impact on a property. It could even stop a property from selling if severe enough. Generally when one flood loss occurs you would lose the preferred rating with the NFIP if you had one. Having a flood loss can also eliminate most of the private flood insurance options as most will not insure a property that has had a loss. However when the second loss and paid claim occur is when disaster can strike. This can turn a property into a severity loss property which has to follow certain mitigation guidelines in order to get insurance through the National Flood Insurance Program and private flood insurance is not available on these type of properties. This is why you should really review things closely before filing a flood insurance claim.

Have questions about flood insurance? Click the link below or visit The Flood Insurance Guru 

 

Hello, Chris Greene, with the Flood Insurance Guru here, where we have an educational background in emergency management with a specialization in hazard and flood mitigation. So we can help you understand your flood insurance options, how to minimize your flood risk, and possibly even how to get your flood zones changed. Today we're going to be talking about the major impact that the new flood insurance rates to the National Flood Insurance Program are going to have in areas like Pelham, Alabaster, and Helena Alabama.
Effective January 1st, 2019 the National Flood Insurance Program has put in some rate increases. Today we're going to talk about those rate increases when it comes to residential properties, investment properties, secondary properties, lake properties, second homes, commercial properties, properties that have been newly mapped to a new high-risk zone, and preferred policies.
So the first thing we're going to talk about is a primary residence. This is going to be your primary home. Let's say you have a policy now through the National Flood Insurance Program. It costs you $1,000 a year. You're looking at a 7.2% rate increase this year, effective January 1st, 2019, which is going to have an impact on you of about $72 a year, which isn't too bad. The big impact is going to be in areas like secondary residences, and commercial properties like we've mentioned. These areas are having a 24.2% rate increase. So let's say that you have a rental house that you're renting out, and it can't be considered your primary residence. If your flood premium is $2,000 a year then you are looking at almost a $500 rate increase per year, and that's just this year. So this could have a big impact on the profitability for a rental house.
Some other areas. Let's say you have a commercial business that has to have flood insurance and your flood premiums are $2,000 a year, you're looking at almost a $500 per year rate increase, for this year. The good thing is on other things like your preferred policies or zone X It's only having a 1%. So on a $1,000 premium, you're literally talking about a dollar and that's it, which is great news for these areas.
Remember, minimal risk areas or zone X generally have flooding 30% of the time. So just because you're in that low-risk zone doesn't mean you don't need flood insurance. It just means that FEMA has not determined it to be a high-risk area, and has not determined the base flood elevation. Other areas where you're going to see a rate increase are what's called newly mapped areas.
So let's say that a property is mapped to a flood zone AE, which is a hundred-year flood zone out from a flood zone X. Of course, during the first 12 months, you can take advantage of new mapping rules, which basically give you that preferred policy rate for the first 12 months. Well, you're going to see a 15% rate increase on those policies now. Now also remember that rate is only good for the first year, and that is there to help you adjust to what your flood premium's going to be. So it's very important that you look at these things.
It's also important that you understand the private flood insurance options and all your flood insurance options overall in Pelham, Alabaster, Helena, Alabama all these different areas where you're going to start seeing a lot of these flood rate changes. 

 

Remember we simplify flood insurance and understanding flood risks through education. If you want to learn more about flood education please visit our learning center by clicking below.

 

 

Want to learn more about your flood insurance options? Click below

 

 

In this article, we want to talk about escrow billing nightmares from both the National Flood Insurance Program (NFIP) and the Private Flood Insurance Program. We discuss what you need to know about escrow billing flood insurance. We discuss how flood insurance claims might be covered if payment has not been received.

We want to focus on everything that you should know to ask as a mortgage lender, an insurance agent, and as a property owner.

You could also listen to our podcast below while you read.

Everything NFIP

The insurance company that falls under that federal side of flood insurance is managed by the Federal Emergency Management Agency (FEMA) and the National Flood Insurance Program (NFIP).

As you know by now, even with the Risk Rating 2.0 update, you will still find about a maximum of $250,000 for building coverage and $100,000 in contents coverage for flood loss with the NFIP and FEMA. For commercial properties, the building coverage maxes out at $500,000.

Paying with Mortgage

It's important to point out a few things you need to know when getting your federal flood policy signed especially if you're paying it out of a mortgage loan or escrow payment.

One of these things is that you won't really be getting a declarations page or the actual policy with the National Flood Insurance Program right away. As a result, the signed application can serve as your proof of coverage for up to 29 days.

What does this mean?

Simply put, your mortgage company has 29 days to make a payment for your flood policy's insurance premium before the 30-day wait period kicks in. Think of this as a form of grace period for your mortgage company to pay your flood insurance premiums.

REMINDER: The 29 days will only be for the payment of the policy. There will still be a 30-day waiting period for the actual flood insurance policy to be available.

What if you missed this grace period for your mortgage company to pay your flood insurance?

Well, because of the NFIP's strict guidelines, coverage would not start for 30 days. You might get set back when it comes to both your building and personal property coverage if this payment wasn't made in time because once payment is received after the 30th day is when the 30-day waiting period starts.

Paying Directly as an Agent or Insured

Now, when paying as an insurance agent or maybe you want to pay it out of your own pocket as a property owner, you will only get a 10-day period to pay your policy. The same thing goes, if you miss this 10-day period, your coverage will not start for 30 days.

What If a Claim Occurs?

Let's keep it simple, so long as you made your payment before a claim occurs, you will get the respective coverage written in your flood insurance policy.

Equally, this means that if your mortgage company missed the 29-day payment period, then you will not get any of the coverage you have with your policy until the payment is made.

It is only AFTER payment is made will you be able to get coverage for your flood insurance claims.

Everything Private Flood

So you might be wondering, what about the private flood insurance carriers? Where do they stand on this topic?

Well, it's important to note that just like their flood insurance coverage, payment terms when it comes to escrow billing or escrow account may vary from one private insurance company to another.

This may mean that you will be able to get only 10 days to make a payment up to 15 days. This is regardless if you're paying through a mortgage, an insurance agent, or out of your pocket.

Again, this really depends on the private insurance carrier that you applied with, so it's important to really know the guidelines that your private flood carrier has when it comes to these types of concerns.

What if a Claim Occurs?

Private flood insurance has different standards and guidelines when it comes to payment and flood policies. So you might be shocked to know that some private flood insurance companies will outright reject or deny a claim if it's made before payment is made.

Yes, that means that you won't get any of the coverage with your policy if there was no payment before the flood claim was filed. This is why we highly recommend that you pay your flood insurance premium upfront, as hard as it may be, to avoid this type of situation.

As an insurance agent, it's important to know which carrier has these guidelines or simply know the guidelines of the carrier that your client is going for. This really helps you, as an agent, avoid E&O Claims since you get to inform your client everything about their flood insurance carrier.

In our experience, we've had many clients file flood claims two weeks and even two days after closing. Thankfully, they get coverage for the flood loss because they were able to get the payment made before these claims.

If you want to know more about the differences between the NFIP and Private Flood Insurance, watch our video below:

So if you need assistance with these payment guidelines for your flood insurance, so you can make sure that you have coverage on your property, understand flood risks, or anything about flood insurance, click below to reach us.

We want to simplify flood insurance, so you can get a better understanding of flood risk, flood insurance, and mitigating your property long-term through education.

The federal flood insurance industry has changed a lot since the Risk Rating 2.0. One of the biggest changes is how the Federal Emergency Management Agency (FEMA) and the National Flood Insurance Program (NFIP) will look at flood zones. FEMA, NFIP, and mortgage lenders would have to only follow the new rating system and regulatory standards of the Risk Rating 2.0.

As natural disasters are becoming progressively more destructive and unpredictable, we want to discuss how changes on looking at flood maps would change.

Risk Rating 2.0

The implementation of the Risk Rating 2.0 or simply NFIP 2.0 significantly impacts the rates going around with federal flood insurance. For the most part, this means that there will be an increase in rates as the new program gears towards a more accurate flood risk per property. We'd like to call this the fingerprint of your flood risk due to the nature of having an individual property getting a unique risk rating score.

This program basically says that each property will get a unique flood risk score per variable with the rating engine system in from both the legacy program from Federal Emergency Management Agency (FEMA) and new things coming into consideration.

The things that will carry over from the legacy program which will still have a bearing on your flood insurance rates are as follows:

• Flood zone designation based on community flood maps. Flood zones also have the bearing to require flood insurance if you're in the Special Flood Hazard Area (SFHA) or High-Risk Zones
• Flood Insurance Claims. Despite changing to a claims variable system, flood claims with FEMA may still impact your overall rates.
• Policy assumption and policy transfer.
• The Grandfather Rule.
• Pre-FIRM and Newly Mapped discounts.

The new things that will impact your rates will be from:

• Types of flooding that your property experience.
• Flood frequency.
• Distance to any water source.
• First-floor height or distance of the first livable area to grade (ground).
• Elevation of the structure or the property itself. How high is the first floor of the property compared to the ground hence properties that are elevated are most likely to get a decrease due to this.
• Replacement costs. This means that higher-valued homes will get an increase and lower-valued homes will get a decrease due to the overall expenses to rebuild the property due to flood damage.
• Flood Risk Mitigation Measures made on the property.

Despite these changes to the overall rating engine systems in the Federal Emergency Management Agency (FEMA), your flood insurance policy will still follow the same amount of $250,000 for building and $100,000 in contents max for flood coverage.

The Increased Cost of Compliance (ICC) is also one of the things that will carry over from the legacy National Flood Insurance Program to this new program as well as the Community Rating System (CRS) discounts.

Are Preferred Flood Zones Gone?

Traditionally with the National Flood Insurance Program (NFIP) and even in private flood insurance companies, you'll see low-risk flood zones and special flood hazard areas (SFHA) or high-risk flood zones. I can even remember the time where I can tell your flood insurance premiums in these low-risk flood zones like Flood Zone X depending on the coverage amount. So you'd see immediately how these low-risk zones or preferred zones immediately impact your rates and these rates are about $400 to $600 per year.

On the other hand and you would notice with the new program through Risk Rating 2.0, flood zones no longer impact your flood insurance rates with FEMA and the NFIP. So the perks of being in a preferred zone and that preferred rate will no longer be in the picture. This means that federal flood insurance will no longer rely on a Flood Insurance Rate Map (FIRM) to say that you will get a preferred rate since flood zones don't impact rates anymore.

On the other hand, it's a different story when it comes to the private flood insurance industry. We're still noticing a lot of private flood carriers who look into these low-risk zones and provide that same preferred rating on premiums of about $400 to $600. It's important to note also that since these insurers are managed by private companies, they don't necessarily need to follow the changes coming to federal flood insurance.

Despite these changes and flood zones only becoming more of a factor that determines whether or not you're not required to buy flood insurance for your property, it's still important to get a form of security for a property. If you want us to help you get a desirable quote from both federal and private flood insurance, click the link below to reach us.

We also have a flood learning center where we try to answer your frequently asked questions about flood and flood insurance.

Remember, we have an educational background in flood mitigation which lets us help you understand your flood risk, flood zone, flood insurance, and mitigating your property long-term.