Do you need to build an ark?
June 1 is less than a week away – the day Floridians and many of the residents along the east coast dread every year. However, since it’s a day that most of us have come to terms with, why do I feel more anxious than usual? Probably because the expected number of storms is below historical levels. Do I hear the kiss of death?
This year’s storm level prediction is well below the 30 year average standing at nine named storms, five hurricanes and one major hurricane. The 30 year average is 12 named storms, six hurricanes and three major hurricanes. I’m sure the meteorological science for this year’s prediction is perfect, but perfect or not, it only takes one storm to create a serious flood situation in your home.
There has been a lot written about the state of flood insurance since 2012, when the government attempted to reform the system. Since then many of what was enacted then has been rolled back in an attempt to find a less costly way for the federal government to continue subsidizing flood insurance.
The Federal Emergency Management Agency (FEMA) has placed more than 20,000 communities in the United States into a category of flood zones. FEMA’s National Flood Insurance Program which dates back to 1968, is eligible to everyone in these communities and currently insures 5.6 million residences and small businesses nationwide.
If you live in a one of the V zone or one of the A zone flood categories you’re living in the highest flood zone level. These areas are defined by FEMA as being in a Special Flood Hazard Area and are lower than the Base Flood Elevation. V zones are the most hazardous of the Special Flood Hazard areas and generally include the first row of beachfront properties. The hazards are increased because of wave velocity, hence the V designation.
Lenders will mandate that homeowners carry flood insurance on any mortgaged properties that are in one of the above flood zones. In addition, you will be required to verify annually that this policy is in force.
Keep in mind that if you are closing on a property in a flood zone during the time of a potential storm, you may not be able to insure the property until the threat of the storm has passed, delaying the closing.
Although the federal government collects 3.5 billion dollars in annual premiums from the National Flood Insurance Program it is still $24 million in debt. The government and members of Congress have shown their desire to reduce the number of flood policies in the program indicating that the private sector could provide these policies.
Based on this, several companies are now looking at the possibility of selling flood insurance to homeowners at affordable rates and still make a profit. The companies are high end reinsurers like Lloyd’s of London and the American International Group, but the door has been opened and other companies are approaching state regulators and could eventually set up flood insurance programs.
Knowing your flood zone designation is like knowing your blood type, it could really come in handy when you least expect it. It’s especially important to waterfront and Island buyers to ask the right questions about flood zones and flood insurance on a property you may be considering making an offer on.
Building an ark may be overkill this hurricane season, especially if the weather nerds are correct, but it’s a long time between June 1 and Nov. 30, and there are no guarantees. Noah may not have had to worry about flood zones, but Floridians certainly do.