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Understanding Flood Insurance & Cost-Saving Options for Your Home & Business

There are many reasons why bringing up flood insurance with homeowners and business owners in the North Shore and Greater Boston, MA, can elicit lots of eyeball rolling and sighs of exasperation.

Certainly, the main cause of anxiety over flood insurance is the high premium that you often have to pay for coverage. But, not to be overlooked, is the frustration caused by the changing rules, regulations, flood maps and zones that are regularly put forth by the National Flood Insurance Program (NFIP). Over the past 41 years since congress established the NFIP, which is the federally backed flood insurance program, there have been tidal waves of confusion around flood insurance.

That’s why the Gilbert Insurance team would like to use this blog to not only provide important information about Flood Insurance that could answer some of your questions and concerns, but also to share some astonishing industry news – you might be able to significantly lower your flood insurance premium.

What is a flood event?

First, it’s key that you understand how a flood is defined by the insurance industry. This way, you will be 100% clear on what type of flood event your policy is designed to cover. The insurance industry’s definition of a flood is:

A general and temporary condition of partial or complete inundation of two or more acres of normally dry land areas or two or more properties (at least one of which is the policyholder’s property) from any of the following:

  1. The overflow of inland or tidal waters
  2. The unusual and rapid accumulation or run off of surface waters from any source
  3. A river of liquid and flowing mud on the surfaces of normally dry land areas, as when earth is carried by a current of water

In addition to providing coverage for these situations, a standard flood insurance policy also provides coverage in case of a flood caused by land collapsing along the shore of a lake or other body of water as a result of erosion or due to undermining caused by waves or currents of water that exceed anticipated cyclical levels.

A good question to ask yourself now, and one that the Gilbert team always addresses with our clients, is, “What is the likelihood that one or more of these flood situations is going to happen in my area?” Understanding this risk is critical because it is one of the primary factors used in determining your flood insurance premium.

How are flood insurance rates determined?

Your property’s location and what flood zone it has been assigned to are the primary factors that will determine your flood insurance rate, along with the amount and type of coverage purchased and the design and age of your structure.

For homeowners and business owners who are not completely familiar with the idea of flood zones, these are geographic areas to which the Federal Emergency Management Agency (FEMA), which administers the NFIP, has assigned varying levels of flood risk. Thus, each zone reflects the severity or type of flooding in the area. Most important, EVERY home and business has been classified into a zone; whether you live along the North Shore’s rocky coastline or in one of Greater Boston’s many inland communities, there are no exceptions.

Below is a high-level overview of the Flood Insurance Risk Zone Designations that your property might be assigned to:

  • Zone B, X, or C are considered moderate to low risk areas where flood insurance is not mandated, but is available through the NFIP for all property owners as well as renters.
  • Zone A, AE, A1-30, AH, AO, AR, or A99 are communities that are high risk areas and property owners in these areas are mandated to have flood insurance.
  • Zone V, VE, or V1-30 are high risk coastal areas where property owners also have mandatory flood insurance purchase requirements.
  • Zone D denotes areas that have possible but undetermined flood risk or areas where no flood hazard analysis has been conducted, so flood insurance is not mandatory, but highly recommended due to the uncertainty of flood risk.

This may make Flood Zones seem rather simple, but, in actuality, the way that they are defined and applied is quite complex. The NFIP has evaluated every piece of property, and determined how often they believe that area will flood and how severe the flood event could be, in order to establish the proper flood insurance rates.

Making this process more confusing is that, over the past decade, the NFIP has continuously revised their rates and flood zone maps. These changes have often resulted in substantial and unexpected flood insurance costs and premium increases for both homeowners and business owners.

Why do flood insurance rates keep climbing?

Since its inception in the late 1970s, the goal of the NFIP has been to subsidize flood insurance rates in order to enable homeowners, businesses, and even renters to insure their property against flood damage with reasonably priced coverage.

But, in 2012, after almost 25 years of providing these subsidies, the federal government decided that the costs of the flood program had gotten out of control. So, they passed a law removing subsidies and raising everyone’s flood insurance rates. While people already in the program were grandfathered in, new property owners found themselves hit with extraordinarily higher flood insurance rates than previous owners.

To make matters even worse, coinciding with these increased rates, the NFIP also decided that, to further help reduce the flood program costs, they would get more people involved in the federal flood insurance program.

How do you force people to be part of a program if they don’t want to be? Well, the NFIP did this by redrafting all the flood maps and expanding many of the flood zones to include many more privately- and commercially-owned properties. Many properties that were once designated as having low and no flood risk became part of higher risk areas, leading to – you guessed it – even higher flood insurance rates.

How can Gilbert Insurance help lower your flood insurance rates?

There is no doubt that these rate and map changes have had a significant impact on the bank accounts of homeowners and business owners like you. At Gilbert Insurance, we have heard many stories from property owners who were previously assigned to a low, moderate or undetermined flood zone, who now are required to purchase flood insurance because their property has been reassigned to a higher-rated zone.

At Gilbert Insurance, the last thing we are going to do as your insurance agent is sit idly by and watch your flood insurance rates skyrocket. Instead, we have been diligently cultivating relationships with top quality insurers who have recently entered into the flood insurance marketplace. Through these partnerships, we may be able to provide access to much more affordable options than through the NFIP.

Another service that we offer our clients that can often save them many dollars is researching whether or not their property has an NFIP elevation certificate. This is a tool used to provide elevation information, specifically how far above sea level your property sits, and it is part of the rating information that determines the premium that the NFIP charges for your property. However, if you do not have a certificate, then your property is automatically placed in one of the “A” flood zones, or high-risk areas, which means you could be paying much more for your flood insurance than you should be. The certification process could demonstrate that you deserve a much lower rate through the NFIP, so we strongly suggest that you work with your Gilbert agent to find out if you need an elevation certificate.

There is so much more information that we would like to share about flood insurance, like how Flood Insurance is different from homeowners insurance, that will not only answer more of your questions about this critical protection for your home and business, but might also save you money. For more information, please contact us or come visit us in either our Reading or Malden, MA, offices. A member of our Gilbert team would be glad to assist you with all your flood insurance needs, including identifying your property’s flood zone, reviewing the elevation certificate process, and searching for a quality and, hopefully, lower-priced flood insurance option for you and your valuable property.

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