Flood plains and flood insurance: Can someone give us info on this?

[hedgehog]

My understanding is that the federal government subsidizes flood insurance to some extent, but that the bulk of the cost is on the homeowner. No federal aid is available to people who lose property located on a designated flood plain. It sounds like a good system to insure that people don't build on a flood plain without knowing they are taking a risk. It's up to them to decide whether or not to buy the insurance. Where the scheme falls apart is that local governments, often under the influence of local developers and land owners, are responsible for designating the flood plains. Even when an honest effort is made to assess risk, historical information doesn't account for new record high floods.

Is this a correct explanation?

[cbayer]

1. If you live in a designated zone, your normal homeowners insurance is not required

to cover damage from flood. My understanding is that flood zones are designated by the federal government, but I could be wrong.

While not required to buy flood insurance, it is available through other agencies. I am not sure to what extent the government subsidizes these. The homeowner pays the full premium as far as I know.

If you have a mortgage, you will most certainly be required to carry flood insurance in these areas.

One of the big battles in New Orleans was over which policy should cover damages. I had damage from the storm that caused flooding of my home because of the roof. My homeowners paid. But for many, the homeowner's insurance companies took the position that they were not responsible.

[hedgehog]

3. I checked my policy carefully. Any damage from broken water pipes

or water falling from the skies (missing roof, broken window, etc) is covered. Damage from water moving across the ground is not.

[Curmudgeoness]

5. Actually, no normal homeowners insurance covers floods.

But if you are living in an area that is not designated as a flood plain, the insurance is reasonable. But you must have flood insurance anywhere to be covered if it is damage from flooding.

[Yo_Mama]

9. Standard Homeowner's policies don't cover floods

You can get private policies for flooding basically only in areas in which there is no risk of flooding, so it's not much use.

The flood insurance program is indeed subsidized by the federal government, and often you buy flood insurance from a company, but it's really NFIP covered. The federal government picks up any underwriting losses, and those losses are substantial.

[cbayer]

13. I did not know this because I have NEVER had a house outside of a flood zone.

Thanks for the info.

:hi:

[Curmudgeoness]

2. The federal government is the place where you go for flood insurance.

Funny, huh, that this is not privatized when all other insurance is? Well, it is probably because, for the most part, it is often a losing business. And although it is expensive to insure in a flood plain, it is not expensive enough to cover costs to the government. I only wish that it was a deterrant to building in a flood plain.

I know from Houston how it works there. If you bought a house in the "100 year flood plain", which is anyplace that has been flooded in the past 100 years, you had to get flood insurance. Since I never owned a house outright (always had a mortgage), I do not know if you had to have flood insurance with a paid-for house, but you did have to have it if you had a mortgage.

The local developers and land owners did not designate flood plains, but they could be responsible for new areas where flooding occurred outside of the 100 year flood plain. New construction often caused flooding in areas never hit before.

[hedgehog]

4. Anyone know who designates the flood plains?

[Curmudgeoness]

6. I believe that FEMA designated flood plains based on

any land area that has been flooded in the past 100 years. (Or any number of years that they are dealing with---as I said, at least in Houston, it is a 100 year flood plain.) So the designation is supposedly based on actual flooding occurences in the records.

[Yo_Mama]

8. Yes, that's right

It's FEMA. Periodically they revise the maps. The standards are the same nationally, so your Houston requirements are going to be the same as anywhere else.

[Ineeda]

10. In Florida, flood insurance is optional, as is wind coverage.

Mortgage carriers usually require it though, until they no longer own the property. I've wondered about all the victims of Irene and other storms. All those people not living on the coast or near prone-to-flooding rivers probably didn't have insurance, just as I, living in Florida, don't have earthquake insurance. What are their options? Perhaps FEMA offers low-rate loans.
And to answer your question, I believe FEMA determines flood zones, and data is analyzed and modified periodically.

[cbayer]

11. As far as I know it is privatized, but subsidized by the feds.

When I had a policy, I wrote the check to a private insurance company.

:shrug:

[Yo_Mama]

7. FEMA's booklet will give you answers

You can download it at this page:
http://www.fema.gov/library/viewRecord.do?id=1404

This is the short, non-technical version. 70 pages.

NFIP was begun at the end of the 1960s. Local communities do not determine flood zones (FEMA does), but local communities have to adopt floodplain zoning rules (designed to minimize flood exposure to the community) in order to qualify for the federally supported flood insurance program.

So not everyone with a building in a 100 year flood plain has access. If your structure does qualify, any mortgage comes with required flood insurance. Also, in some cases FEMA will give disaster grants with the condition that the recipient buy flood insurance!

If you just own a home outright, you aren't forced to buy flood insurance but you can. Usually you will get WYO policy, which is something of a boondoggle in my opinion. See what you think:

The Write Your Own (WYO) Program, begun in 1983, is a cooperative undertaking of the insurance industry and FEMA. The WYO Program allows participating property and casualty insurance companies to write and service Federal flood insurance policies in their own names.

Companies underwrite policies and process claims while the Federal Government retains responsibility for underwriting losses. All WYO Companies provide identical coverage, and rates are subject to NFIP rules and regulations.

[Curmudgeoness]

12. So what is the point of the WYO policies? I suppose

this is why you consider it a boondoggle. Sounds just like student loans----the government guarantees them but the banks give the loans. Huh? What is the point? The only thing I can figure is that the paper pushing doesn't have to be done by the government.

[Yo_Mama]

15. CBO testimony on NFIP from 2006

http://www.cbo.gov/ftpdocs/70xx/doc7026/01-25-FloodInsurance.pdf

You note that the WYOs are actually generating less net revenue to the government, which is hardly a good thing when the program itself is costing taxpayers!

I'm waiting to see what happens over the next ten years. The huge housing wave saw a lot of structures built in flood plains around the country, and I'm expecting losses to this program to start increasing as a result.

Weather happens.

[Curmudgeoness]

20. I believe that this is one of those situations where the government

has to subsidize homeowners, which is why it is not generating enough in premiums to pay for the claims. And to me, that is one of the things that government has to do. If flood insurance was just a for-profit business, no one could afford to have it. And there is a dilemma in this---it means that a large area of people would lose homes, have no insurance because it is prohibitably unaffordable, and of course everyone would be screaming for the government to help.

You are right that too many houses are being built in flood plains, and that is something that really should be addressed more than the cost to the government to help insure people.

[hedgehog]

14. OK - I think you spotted where I am wrong, but I'm still confused.

Let me get this straight - FEMA determines where the 100 year flood plain is, but the local government has to write zoning laws for that flood plain according to a certain format or else no one can buy the insurance, even if they want to? Is that correct? If so, then I believe what happens sometimes is that a new comer is told "You don't need flood insurance" when the correct statement would be "you need flood insurance, but you can't buy it."

[Yo_Mama]

17. Yes

They call it "floodplain management". FEMA is supposed to set the rules for what qualifies, but how well it does so is questionable.

If the community has not done this, a local won't be able to buy NFIP insurance even with a 3-4% chance of flood each year.

The focus is supposed to be on new building rules, the basic concept being that structures built before the FIRMs were published didn't have the same information and so those owners shouldn't be punished.

[hedgehog]

18. Thank you - I know I could have looked this up myself, but i

thought it was a topic worth a discussion.

[Yo_Mama]

19. It is. We should think about these things n/t

[RegieRocker]

16. subsidizes flood insurance to some extent, but that the bulk of the cost is on the homeowner.

Like all insurance it has a deductible, is much lower priced that private (corporate) insurance (1/10 the cost) and it covers you quite nicely. I know.

[quaker bill]

21. I deal with this for a living

FEMA creates the Flood Insurance Rate Maps (FIRM maps) that delineate floodplains. They are assisted in this by the USACOE (floodplain studies) and the USGS (base topographic maps) and hydrologic data. These are occasionally altered by a locally funded study for a Letter of Map Revision (LOMR). A LOMR may raise the expected flood elevation, or lower it depending on the data.

Flood insurance is available to anyone. Those who live in Zone A pay the highest rates because they live on land that is statistically predicted to flood 1 time in 100 years or more. This means that there is at least a 1 percent chance that these properties will flood this year. Folks in Zone X have a 1 time in 500 year or lower risk of flooding this year (0.2 percent chance or less) and pay a lower rate.

Properties in Zone A have a 1 percent or greater chance of flooding any year, while unlikely, they can flood 3 years in a row.

FEMA has a "flood hazard minimization" program. What this means practically is that the first time you get flooded, FEMA will cover you for 100 percent of your insured losses to rebuild, anywhere, including in the same place. However, the program has a repetitive loss restriction, in short, if you rebuild in the same place, the next time you are flooded, FEMA will cover only 50% of insured losses, and nothing after that. If on the other hand, you choose to move up hill, out of the flood plain, but in spite of this get flooded again by a much larger event, you will be covered at 100 percent.

They use the money to encourage people to relocate.

[hedgehog]

22. Quaker bill, with your background, may i suggest you post an

OP giving an over view answering some of the questions raised in this thread?

Maybe I'm too suspicious, but I'd love to know if local development interests sometimes undermine the program.