A Homebuying Guide for Flood Zones
As we head into homebuying season, it continues to be a competitive market for your clients. There are already so many stressors baked into the process: Can I find the house I want? How many offers am I up against? Am I paying too much? Evaluating the risk of flooding when buying a house is just one more concern to add to the list.
This guide can help you talk your clients through a potentially confusing aspect of the homebuying process. You can relieve their worry while helping them to find coverage that gives them peace of mind.
Concern #1: What flood zone is my house in?
You can use the FEMA Flood Map Service Center to determine your client’s flood zone. Just enter their property address and the tool will locate the applicable flood map, as well as when it was last updated. You can then download the map, which should display the property’s designated flood zone.
According to FEMA, one-in-four flood claims come from outside designated high-risk flood zones, known as a Special Flood Hazard Area (SFHA). Homes located in these SFHAs also are 5X more likely to experience a flood than a fire. So, you should consider talking with your clients about flood insurance, no matter where their new dream home is located.
Concern #2: What do the different flood zones mean?
Flood zones fall into three basic categories:
We explain the full range of flood zone codes in another post. In summary, flood zones that start with the letter A or V are considered high-risk. However, as previously noted, floods can and do happen outside of high-risk zones, and flood zones can change. Officials sometimes commission new studies to update flood zone maps. Earlier this year, hundreds of homes in the Nashville area were remapped into high-risk flood zones that mandate flood insurance coverage.
Concern #3: Is the homebuying process different if I include flood insurance?
For homes in moderate or low-risk flood zones, there is nothing different about the homebuying process. If your client is using a government-backed mortgage to finance a home purchase in a high-risk flood zone, they will most likely be required to purchase flood insurance. That’s where you come in!
One major change to this process in recent months is that you are no longer required to provide an elevation certificate to purchase flood insurance through the National Flood Insurance Program (NFIP). Under Risk Rating 2.0, your client may choose to provide you with an elevation certificate to determine if it will lower their insurance cost.
Aon Edge continues to offer EZ Flood, our private flood insurance product, without the need for an elevation certificate.
Concern #4: Can a flood zone change?
The short answer is: yes. Your client may buy a home in a low- or moderate-risk flood zone where flood insurance could be beneficial, but isn’t mandatory. Over time, local flood plain managers may commission a new study of an area, or FEMA may acquire new data that paints a more accurate picture of flood risk. Flood risk can change due to any of several factors, including:
The new data may lead to a reclassification of the area into a higher-risk, mandatory flood insurance zone. Conversely, the reassessment could determine that flood risks have declined.
Are your clients aware of the flood risk in their dream home?
Speaking to your clients proactively about flood risks and insurance is a great service. Unfortunately, 21 states do not require sellers to disclose any information about flood risk to be disclosed to a homebuyers. If your client’s new home is located in a high-risk zone and they are required to purchase flood insurance, they may not discover this hidden cost until very late in the homebuying process. If the new home is located in a moderate to low-risk area where flood insurance is not required, they may never be informed of the history of flooding in their area.
You want your clients to have every option available to them. You can help them to understand the big picture of their risk and determine whether to include flood insurance for increased financial security or not.
This information is provided for general informational purposes only and is not intended to provide individualized business, insurance or legal advice. This information is not a replacement for any NFIP publications.