by Lauren G. Steinhardt, Producer, Gillis, Ellis & Baker
Last month we all watched as our neighbors across our state were enveloped in floodwater. As the water subsides, and helping hands busily take on tasks that are all too familiar to many in New Orleans, I’ve been struck by the pervasive misunderstandings that surround the risk of flooding and Flood Insurance. Below are a few points to clarify popular misconception, in particular, as it relates to the map changes taking place in Orleans Parish on September 30, 2016.
- You are in a flood zone. We all are. Every community in Louisiana (and most of the US) is mapped by FEMA and fits into one of many flood zones based upon the likelihood of a flood in any given year.
- The real question is: Which zone are you in? Zones B, C, and X are moderate risk zones. Any zone that starts with an A has a higher risk of flooding, and Zone V has the highest risk of flooding.
- Special Flood Hazard Areas: The A Zones and V Zones are known as Special Flood Hazard Areas (SFHA) and are considered susceptible to a flood that has a 1% (or higher) chance of occurring in a particular area in any given year.
- Recurrence Intervals: A flood with a 1% chance of occurring in a particular area in any given year is commonly known as 100 year flood. The recent flooding in Louisiana is the eighth 500-year (or greater) rainfall event in the US in just over a year.
- New Flood Maps: Effective September 30, 2016 new flood maps will go into effect for Orleans Parish. Many properties will no longer be located in Special Flood Hazard Areas. The owners of properties that are moving out of SFHA will likely see a reduction in flood premium. Many of the companies that administer flood policies for the NFIP will review the policy and if possible, send refunds to their client’s midterm. With thousands of clients affected, this process will take time, but still good news!
- Two changes are taking place. The maps in some areas are being revised to reflect improved drainage systems, moving some areas from high risk flood zones to moderate risk zones. The other change taking place has to do with the Base Flood Elevation, which is changing in some areas. If the structure on a property is positively elevated relative to the Base Flood, the risk of flooding decreases, as does the flood premium. Even if your property isn’t moving out of a high risk zone, you may still benefit from the change in Base Flood Elevation.
- But, don’t let your guard down. If you are told by a Real Estate agent or your Lender that you don’t need Flood Insurance they mean you don’t have to have Flood Insurance to qualify for a federally backed mortgage. They don’t mean Flood insurance isn’t important to protect your assets.
- Flood insurance covers physical loss to a structure and/or the contents contained in the insured structure. Homeowners, keep in mind, coverage for loss of use is not included in Flood Insurance. Similarly, Business owners should remember that Business Interruption is not covered by the NFIP. Some insurers offer a Difference in Conditions (DIC) policy to make up for this gap – talk to your agent about the availability and pricing.
- Hindsight is not a reliable forecaster for future events. As we’ve seen time and time again, “I’ve never flooded before” doesn’t mean, it won’t happen in the future. Flood insurance policies for homes in B, C or X zones is usually less than $500 for $250,000 of building and $100,000 of contents coverage. If you choose to retain this risk, be sure you have the financial capital to recover without insurance.
Saying you aren’t in a flood zone is like saying you don’t have a temperature. You always have a temperature. The question is: Do you have a fever?
The importance of knowing your risk is clear. For most Americans their home is the largest asset they will ever own. The exceptions are generally business owners, who likely have even more funds in buildings and contents. Careful consideration should be taken to protect your home or business. Do your research and talk with your insurance agent to make an informed decision. Any of us can be affected by a flood. If it happens to you, we want to be able to tell you it’s going to be okay, because you bought flood insurance.