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Navigating Flood Insurance Requirements When Buying a Home

In addition to the hazard or "fire" insurance coverage all lenders require, you will also need flood insurance when purchasing property located in an area identified by the Federal Emergency Management Agency (FEMA) as "Zone A." These high risk flood areas -examples of sub-designations are A1-A99, AE, AH, and AO - are assessed as having a 1% annual chance of flooding. Federal law requires lenders to mandate flood insurance coverage on properties located in high-risk areas. Most lenders do not require flood insurance for properties located in moderate risk areas, such as B, C, or X, even though FEMA reports that nearly a quarter of all claims are on properties in moderate risk zones.

Elevation Certificate

Flood maps are periodically updated by FEMA and represent more of a work in progress than a perfect assessment of whether or not a given house will flood. FEMA organizes and publishes data from extensive flood studies on its Flood Insurance Rate Maps (FIRM) to indicate the frequency and severity of anticipated flooding for each community. This is not a perfect process and it's not uncommon for a property listed in a high risk zone to be located above the base flood line. Property owners can challenge their flood zone ratings, however this is a somewhat involved process that can sometimes take years to remedy. A potentially easier solution can be found with a favorable elevation certificates and by working directly with your insurer who might offer a preferred policy.

An Elevation Certificate is typically prepared by a licensed surveyor and documents the height of the lowest floor of an existing structure.  The height is certified relative to the Base Flood Elevation of the property on which the structure is built.  (The Base Flood Elevation is also known as the "100-year flood elevation" and is itself set relative to sea-level.) If the lowest point of the structure can be documented as being one foot above the BSE you should be eligible for a reduced flood insurance premium.

If you are interested in buying a home that is located in a flood zone, your first concern is what your risk and exposure are. But, again, it is not at all uncommon for homes to be located in flood-prone neighborhoods that have little if any risk of flooding. If you've determined you still want the house, your next concern is what the flood insurance costs will be. The elevation certificate is your best means of getting a clear answer to this question since without it your insurer will just go by FEMA's posted Flood Insurance Rate Map. Here are a couple quick steps you can take:

  • Ask the sellers for a copy of their Elevation Certificate.
  • Check with the city/county government as one may have been filed when the house was constructed.
  • Ask your realtor for assistance in tracking down an Elevation Certificate that may previously have been commissioned for the property and its structures. If it was sold within seven years, those handling the prior closing may have it on file.

Once you have the elevation certificate (and assuming it shows favorably) you should be eligible for a reduced flood insurance rate. Insurance companies are naturally protective of their interests and calculate rates based on worst case scenarios. Not every insurer will be willing to take this new information into consideration. (I often see this in Mill Valley where many areas are considered off-limits by some insurance companies due to fire hazards.) If you have trouble finding an insurer willing to play ball, I suggest contacting an insurance broker who has the ability to efficiently shop providers for the best rates.

One excellent Marin-based insurance broker who has helped many clients is Ramona Johanneson of Farallone Pacific. I have seen her assist clients where many insurers have failed to provide a policy and feel she is an excellent resource. Ramona can be reached at 415-493-2502; [email protected]

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