Why do I have to buy Flood Insurance?

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Given the massive financial losses in the past few years related to floods, the law now provides that lenders can require homeowners to have flood insurance if the property lies within a certain flood zone. This requirement falls on the homeowner to provide this insurance, and some homeowners are astounded at the cost of acquiring the necessary coverage. However, there are things you can do if your lender informs you that you are required to purchase flood insurance to appeal this decision.

Determine if your Home is in a Flood Zone

The first step in determining your vulnerability to a flood is to look at the flood insurance map provided by FEMA on its website. FEMA, publishes an annual Flood Insurance Rate Map, or FIRM, to indicate areas that have been designated as being in a flood plain. You can look at your property in relation to the flood map by visiting www.msc.fema.gov.

There, you can view the map for free and order a copy of the map for your property for a fee. You can also create a FIRMette ? a paper copy of your property?s particular portion of a FIRM, or Flood Insurance Rate Map. This allows you to target your property and have documentation showing your flood risk as defined by FEMA. FEMA determines the flood plain based on 100 years of data and designates certain areas as Special Flood Hazard Areas, or SFHAs. If your home falls in an SFHA, you will be notified by your lender and you have 45 days from the date of that notice to purchase flood insurance.

Can I dispute a Flood Zone Placement

However, homeowners who have received this notification and disagree with the findings have the right to a review of their property. Perhaps your property is elevated above the flood plain area, and you do not feel that you are in danger of damages from a flood. Perhaps FEMA?s map shows you to be in a low-risk area, but your lender claims your house is in a high-risk zone. Perhaps you have made improvements that may affect your flood vulnerability. Whatever the case, you can file an application to have FEMA review your property specifically based on survey elevation reports and other data. This information can then be used to appeal your lender?s request. The application form for this appeal is located on FEMA?s website, www.fema.gov.

When a homeowner applies for a review, a Letter of Determination Review or LODR is issued. This means that FEMA will review the available survey data provided by the homeowner and make a determination within 30 to 60 days as to whether the homeowner is in danger of damage from a flood. The homeowner may be required to hire a surveyor to perform an assessment of the property if recent survey data is not available.

If the homeowner has made improvements to the property that include elevating the building site, a Letter of Map Revision Based on Fill may be issued. If the property was erroneously included in the original flood map, a Letter of Map Amendment may be issued. Any of these determinations may mean that the homeowner is not required to purchase flood insurance. There is no fee for a LOMA, because this usually means the original data was incorrect. However, FEMA does charge an $80 fee for a LODR and a $425 fee for a LOMR-F.

If you have attempted to appeal your SFHA ruling and it still stands, you are required to purchase flood insurance on your home. You have the option of shopping for flood insurance from a variety of homeowner insurance companies. However, if you fail to provide proof of flood insurance within 45 days of the notice or the ending of your appeal, your lender may purchase flood insurance on your property and charge you for it in your monthly mortgage payments. This becomes a lien that can affect the sale of your house or transfer of your property through probate.

How much does Flood Insurance cost?

What you pay for flood insurance will be determined by exactly where your property is on the flood map prepared by FEMA. Property within the SFHA will be charged a higher insurance rate than property on the edge of the area. Generally, the farther you are from the center of the SFHA, the less you will pay for flood insurance. If you feel that the flood map places your property incorrectly close to the center of an SFHA, thereby raising your flood insurance rates, you can use the appeal process as outlined above.

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