Flood Insurance Premiums Are Going UP and Elevation Certificates are Bringing them down!

Written By: Glenn Michaels

Every time there is a flood somewhere in the United States people and businesses look to Federal Emergency Management Agency’s (FEMA) National Flood Insurance Program (NFIP) for relief if they have flood insurance or to FEMA to obtain a non – repayable grant to assist in repairing their home or business.

FEMA’s NFIP has been increasing flood insurance premiums significantly in areas recently hard hit by Super Storm Sandy and other areas that had a flood recently.

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Numerous properties that were not in federal flood zone that did not require flood insurance are now being placed in a flood zone requiring flood insurance. The premiums however are in some cases very large. It was reported that some homeowners are getting annual premiums in the thousands.

There is an opportunity for every property owner, residential or commercial to have the premium reduced or even eliminated. The answer is to obtain from a licensed surveyor or engineer an “Elevation Certificate”

The elevation certificate compares your building’s elevation to a potential flood level. The cost for an elevation certificate is about $600.00 for an averaged size property. It can more for a larger property or commercial property. However, the savings on flood insurance premiums can be reduced significantly that the cost is paid for rather quickly.

If an elevation certificate indicates the elevation of the entire building. The elevation certificate will compare your building’s elevation to the Base Flood Elevation (BFE) the BFE is a flood with a 1 percent chance of occurring in any given year. The BFE identifies how high the water is likely to rise (also called water surface elevation) in a base flood.

Flood insurance rates in a high risk zone (a zone beginning with the letter A or V) are based on a building’s elevation above, at, or below the BFE. It is very important to know the building’s elevation. Properties that are at or below the BFE can expect very high flood insurance premiums.

FEMA indicates that property built or situated below the BFE can expect to pay an annual premium of $9,500 annually or $95,000 over ten (10) years. The same property built at the BFE is expected to pay $1,410 annually or $14,100 over ten (10) years. If the same property is three feet (3) above the BFE they can be expected to pay $427.00 annually or $4,270 over ten (10) years.

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When FEMA sets the maps in place they do not know the actual elevation for each and every property in the flood map/zone. The elevation certificate establishes the actual property elevation which normally is not known until a professional licensed surveyor details the property’s elevation. These elevations are then placed in the evaluation certificate that should be given to your flood insurance company. Every foot above the BFE the actual flood insurance premium will be reduced. “It’s all in the numbers”

The risk side for a property owner, the elevation certificate might not result in a savings if the elevation is below the BFE. In this case the home owner paid for the certificate which did not help. More certificates save money that do not.


About The Author

Glenn Michaels - As an NAMP® staff writer, Glenn Michaels is a mortgage underwriting instructor for Mortgage Underwriter University (www.MortgageUnderwriter.org). As a BBA & FHA DE Underwriter, Glenn is a Pace University graduate who also graduated from New York University’s School of Mortgage Finance. Glenn has conducted numerous training classes and has worked in the mortgage banking industry for 38 years. If you're interested in becoming a writer for NAMP®, please email us at: contact@mortgageprocessor.org.

 


Opinion-Editorial (Op-Ed) Disclaimer For NAMP® Library Articles: The views and opinions expressed in the NAMP® Library articles are those of the authors and do not necessarily reflect any official NAMP® policy or position. Examples of analysis performed within this article are only examples. They should not be utilized in real-world application as they are based only on very limited and dated open source information. Assumptions made within the analysis are not reflective of the position of NAMP®. Nothing contained in this article should be considered legal advice.