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Print Pagefrom Sept 2007 issue of Houston Real Estate Experts - FREE subscription
Harris Flood Map Revision and Its Implications
You Might Be Spending Money When You Shouldn’t and Not Spending Money When You Should!
by John Atkinson
The following stories apparently are being replayed over and over today following the recent complete overhaul of the Harris County flood maps. These are good examples of a lot of misinformation and confusion costing a lot of property owners a lot of money:
An owner receives a letter from the mortgage company demanding the purchase of flood insurance within 45 days to cover their loan amount - or they will “force-place” it at very high cost and add it to the loan balance.
The flood insurance agent advises that an elevation certificate is needed, and the owner finds the cost to be some $250.00 or more (sometimes as high at $475.00). And, because it may take three to four weeks to get it done, the owner waits for the certificate before purchasing the insurance, leaving property at elevated risk of an uncovered flood loss.
It is not necessary to spend this money if an elevation certificate, should one be obtained, would not reduce the premium sufficiently* and if at least one of the following conditions also exists:
- The property was built before its community first became eligible to participate in the federal flood insurance program. This is known as the "FIRM date."
- There is already a flood policy in effect that was rated outside of a SFHA (Special Flood Hazard Area, also known as a “100 Year Flood Plain”) - thus qualifying to be rated using a grandfathered low risk flood zone.
- The property was built after the FIRM date but provably "In Compliance" and it is therefore possible to take advantage of a grandfathered low risk flood zone.
The owners have been prudently insuring the property, although it has not been in a SFHA.
They receive a renewal bill showing a large increase in premium because the property is not in a SFHA. Although the property is a rental dwelling, the renewal bill also charges for the contents coverage that was included in the Preferred Risk program as a packaged feature. Neither of the following recommendations is made to the owner:
- That the contents coverage be deleted since only the owner’s contents are covered.
- That an elevation certificate be obtained to reduce the premium, since they cost $250.00 or more and there is no way to determine if it will reduce the premium.
The property has been re-mapped to outside of a SFHA.
The owner nevertheless receives a flood insurance renewal bill still rating the property as in a SFHA. Unfortunately, insurance companies do not seem to be as enthusiastic about reducing premiums when properties qualify as they are about increasing them. This can be avoided by obtaining a current flood zone determination for which there is usually no charge.
* I know, I know. How can one tell if an elevation certificate will help reduce a flood insurance premium unless one is obtained first? The technology now exists that helps determine what an elevation certificate is apt to show before the cost to obtain it is incurred. This can allow better decision making, and that can lead to the lowest possible insurance cost.
John Atkinson, insurance agent
John Atkinson, a Houston native, has served as general manager of Atkinson Bros. Agency since graduating from the University of Houston School of Business in 1963. Atkinson Bros. is a local independent insurance agency that is family owned and operated since 1936 and specializes in helping property investors make well informed and carefully considered insurance decisions. John can be reached at (713) 664-4021 or by email.