Hurricane Harvey was a painful lesson for property owners, city officials, and FEMA. 85% of homes that were flooded did not have flood insurance because they were in a low risk flood zone and it was not required. Traditionally FEMA has struggled to keep up with flood maps because the demand for constant updating is so high. Local officials and FEMA had gone back and forth for years trying to agree on an updated map but could not before Hurricane Harvey.
As a result thousands of people along the coastline in Texas were hit hard with flood losses, the ability to get reasonable flood insurance in the Houston area, and resources for recovery. As these lessons were learned FEMA is trying to be more proactive in updating the flood insurance rate maps along the Texas coastline. One area that has become a major target is Galveston Texas.
Galveston Texas has been fortunate with its location that it has not experienced a loss like Houston has and FEMA is trying to take preventive measures to make sure this does not happen. So FEMA has sent out its final letter of map determination for Galveston Texas. We are going to talk about the impact that could have and what the options will be.
First of all lets talk about the impact, the new flood insurance maps that are set to go into effect in August of 2019 could impact more than 47% of the population. Not all of this impact will be negative. When flood insurance rate maps are updated it is not always a bad thing since FEMA looks at historical data when updating maps. So if your area does not have a history of flooding then it could be a good thing. This means when the new map is updated your property could be moved out of a high risk flood zone like almost 1400 property owners in Galveston county Texas are expected to experience. So if this happens to you and you have a mortgage then you should get a letter from your mortgage company that flood insurance will no longer be required. Here at The Flood Insurance Guru we always recommend checking these flood zones on a yearly basis. You can verify your flood zone here
Now let's talk about the bad news about these maps where many property owners are placed into high risk flood zones that may have not been there before. You also have property owners that maybe looking at higher premiums because they were moved from a moderate to a high risk flood zones. Roughly 45,000 property owners in Galveston county will be placed in high risk flood zones and an additional 33,000 property owners could be looking at higher premiums because of the risk increasing.
So what exactly does this mean and how will it impact you? Let’s say you have a mortgage on your property then you should receive a letter from your mortgage company. The letter should read something like this. “We were recently notified that your property was placed into a SFHA also known as a special flood hazard area”. So what are your options when this happens? As you can see an event like this could have a major impact on property values because it makes the cost of owning a home to go up, it creates additional headaches having to carry the flood insurance, and then the potential is there to not be able to get the resale value on the home. Now lets talk about the different options out there.
The first option is to contact a flood insurance expert like the FLOOD INSURANCE GURU to look at getting a flood insurance policy with map revision rates. What this does is gives you the preferred rate for the first 12 months and there after the rate would gradually increase each year until it reaches the proper premium level for the risk. This first year rate is generally $525 a year or less. Let's discuss the second option which is a zone change.
A zone change also known as a letter of map amendment or LOMA is when evidence can be shown to FEMA that your flood zone is wrong. Basically the lowest adjacent grade of your home has to show above the base flood elevation in order to get this approved. So where can you look at getting this done. We recommend reaching out to someone like The Flood Insurance Guru who can match you with the right resources to start this process. If this does get approved then a letter is received from FEMA that is sent to the mortgage company stating the property is in a low risk flood zone and that the mandatory requirement for flood insurance should be removed. If you are not lucky enough we recommend looking at the last option which is private flood insurance.
Private flood insurance can be a great option but before we discuss it let's talk about how exactly it is different from the National Flood Insurance Program or NFIP. The NFIP is the federally backed flood insurance program. This program is managed by FEMA, so the rates are controlled by the government as well as the coverages. When searching for flood insurance if you are getting rates through the NFIP they should all be the same but many times they are not because agent knowledge is different when it comes to flood insurance.
So what exactly does the NFIP cover? The NFIP covers residential buildings up to $250,000 and contents up to $100,000. It pays out generally in two situations either more than one property is inundated with surface water or more than two acres is inundated with water. Now that we have an understanding of what NFIP covers lets talk about exactly what private flood insurance is and what it covers.
Private flood insurance is flood insurance that is provided by private insurance carriers and many situations is backed by Lloyds of London. When it comes to rates this program works differently than NFIP. Private insurance carriers can make up their own rates and can choose to turn down certain risks. This allows private companies to properly manage risks. Because of this private flood insurance companies can many times provide rates that are 40-50% less than NFIP. However because of Hurricane Harvey getting private flood insurance in Texas has become much more challenging lately. So it is very important to understand all the options on the table. As a result many people are putting their flood insurance policies with private carriers instead. Now that we understand how the pricing works lets talk about coverages a little bit.
As we mentioned above NFIP provides a max coverage of $250,000 on residential buildings and $100,000 on contents. However private flood insurance companies do not put this limitation on their coverages. Many companies will go into the millions for coverages, this can be a great benefit on higher value homes. Something else that private covers is additional living expenses.
Additional living expenses can provide for temporary housing after a flood, this is important because this is not covered by the NFIP flood insurance policy.
As you can see there can be many difference between an NFIP and a private insurance flood policy when it comes to flood insurance in areas like Galveston Texas and even Corpus Christi Texas.