Flood Compliance Is Not Flood Safety

So, you had a concern when you purchased your home that you might be required to get flood insurance because there are high risk flood zones nearby. Luckily, your lender said you are not mapped into one of those Special Flood Hazard Areas (SFHA or the “100-year flood”), so, of course you didn’t get flood insurance because it wasn’t required – right?

Well, you might want to reconsider that decision because Mother Nature doesn’t care about compliance with home purchasing requirements in the USA. You may not be safe from flood risk even if you are “compliant”, but there is a way to find out what your flood risk is.

A decade ago, FEMA reported over 25% of NFIP flood loss insurance claims were for buildings outside of the SFHA. That means 25% of the property claims were “compliant” but still got hit hard from a flood. That percentage has steadily risen and it’s now about 40%. And that’s for properties with flood insurance that actually filed a claim, which heavily skews the statistics. It can easily be assumed that over 50% of properties that flood are not in the SFHA. “Compliant” properties flood all the time and homeowner’s insurance doesn’t cover this kind of flood.

One might look at that statistic and think the studies predicting where the 100-yr flood will be, must be flawed; however, there are reasons why buildings not in the 100-yr flood areas are being flooded and causing homeowners to lose everything. First, flood events are fickle. It’s not difficult to identify the high-risk areas which are low-lying and susceptible to hurricanes or tropical storms. But predicting where storms might stall and heavy rain events might occur is nearly impossible. And FEMA only maps floods coming from oceans, rivers, lakes, and ponds. They don’t map the flooding from local excess rain that pools in places like your neighborhood. That kind of flooding isn’t even on a FEMA map. Secondly, areas protected by dams and levees are generally not in the SFHA; but dams and levees can fail causing massive flood damage. Further, storms are getting worse and more frequent in many parts of the United States. Thirdly, many FEMA flood maps are decades old and don’t reflect the climate changes we’ve observed, and hydrology studies for the creation of Flood Insurance Rate Maps don’t account for predictions for future changes. If you solely rely on being told you have to have flood insurance as a condition of mortgage compliance, you are not doing your due diligence for protecting what is likely your highest value asset.

Some people think they don’t need flood-specific insurance because they have home-owners insurance or can be made whole with disaster relief. I know it’s been said many times, home-owners policies don’t cover flooding from storms or other external sources. Burst pipes – yes, it’s covered. Hurricane, river cresting over its bank, or spring runoff – no, it’s not covered. And don’t think a government bailout is protection. Federal disaster relief is only available for presidential disaster declarations. Many significant flood events don’t rise to the official disaster declaration necessary for relief payments. And disasters that do rise to that level of destruction provide far less aid than insurance will. Most relief payments are in the form of low interest loans, so they must be repaid over time. The maximum payout for a single-family home is $34,000 for disaster relief. Just 1 inch of water in the house can push your damages above that. Now compare that to $250,000 structure and $100,000 contents coverage with NFIP insurance. And, for higher value homes, the private market can offer more coverage. Finally, those with flood insurance can also submit for disaster relief to pay for things the insurance policy doesn’t cover (e.g. temporary housing).

So, does everyone need flood insurance? In my opinion, no. But every property owner should at least consider their flood risk and make an informed cost/benefit decision based on their own research, beyond what a lender or insurer indicates based on the federal compliance requirement. Consider how far you are from the coast, river, lake, or other flooding source. Look at your elevation relative to those sources and not just distance “as the crow flies”. Consider historic flood losses for your community (number and dollar amounts paid). And look at all available insurance options, including Private insurance carriers for comparable coverage or possibly for a policy that is more tailored to your needs.

Flood insurance is not cheap, but recovering from the devastating effects of a serious flood at your home can be financially catastrophic. MassiveCert has products suited to everyone: flood zone determinations for lenders and insurance professionals, Elevation Certificates, and FloodRisk services for private carriers, real estate agents, and homeowners. A property owner should purchase a FloodRisk Advanced report; just a few dollars will go a long way in helping make this important financial decision. Use the report to make your own decision about your own property. Don’t rely on federal compliance to dictate how you protect what’s yours.

Thanks and Be Safe!

Steve