Do I Need It?
Some advocates of the National Flood Insurance Program (NFIP) say if you can see, hear, or smell water then you should obtain flood insurance. Granted, that is the conservative view, but for most of us, our home is our most valuable possession and between 20 and 25 percent of flood insurance claims come from a medium or low flood-risk area.
If your property is mortgaged or guaranteed by a Federal agency lender or mortgaged through a bank under the jurisdiction of a Federal entity (includes most lenders) and the building is located in a special flood hazard area, you are required to obtain flood insurance up to the principal balance of the loan. To determine if your property is located in a special flood hazard area, contact the city, township or borough office where the property is located. Sometimes a lending institution may require flood insurance for a refinance where flood insurance wasn’t necessary for the original purchase due to changes in the flood maps. A lending institution may also establish stricter requirements as part of its own standard lending practices.
Can I Get It?
Federally backed flood insurance is available for residential and commercial buildings located in participating communities. To participate, a community must pass an ordinance that adopts the FEMA flood maps. Currently, Pennsylvania cities, townships, and boroughs are adopting ordinances incorporating the latest FEMA flood maps. Nearly every community in Central Pennsylvania participates in the program. Contact your city, township, or borough office to see if you are in a participating community. Coverage is also available to renters and condominium associations and even to developers and builders to insure buildings in the course of construction. Coverage up to the following limits is available through the program:
- $250,000 for residential buildings
- $500,000 for non-residential buildings, including small businesses
- $100,000 for contents coverage for residences (owner and/or renters)
- $500,000 for contents for business, including small businesses
Buildings built entirely over water or below ground cannot obtain flood insurance. Buildings declared to be in violation of a zoning ordinance or floodplain ordinance cannot obtain flood insurance. New or substantially improved structures located within a designated Coastal Barrier Resources System (the beach house) are also not eligible. Anyone interested in purchasing a flood insurance policy should contact a local property insurance agency.
Am I Paying Too Much for It?
If you recently purchased property, you may have been charged for determining whether the building is located in a floodplain. If the determination was that your property was in a floodplain, you were notified that you had to carry flood insurance. If you disagree with that determination, Federal law allows the lender and borrower to jointly apply to FEMA to request a review of the lender’s determination.
Why might one disagree with the lender’s determination? In Pennsylvania, unlike other states, structures are not shown on the public records delineating property boundaries. Therefore, it is possible that only part of the property is located in the floodplain while the structure itself is located outside of the floodplain. This situation is most common with large properties that border bodies of water. Challenging the determination could move you from a high risk flood area to a lower or moderate risk area, which could eliminate your need to carry flood insurance or at least lower your premiums. A request challenging the determination must be submitted within 45 days of the date the lending institution notified the property owner that the building is in the special flood hazard area.
The NFIP also has a Grandfather rule that allows property owners who owned a policy before the effective date of the new maps and whose risk zone has or will change using the new maps to pay a premium based on the lower of the two rates. Therefore, it might be prudent to purchase insurance before the new maps take effect. Browse the FEMA website at www.floodsmart.gov for more information on flood insurance.
If you need assistance in requesting a review of a lender’s determination or if you are having trouble obtaining a building permit due to local floodplain ordinance restrictions please contact Wayne Martin at 717-763-1383 or wmartin@reageradlerpc.com.