Rising Cost of Flood Insurance
Commencing 6/1/14, the maximum building coverage under the National Flood Insurance Program (NFIP) will increase from $250,000 to $500,000 per building. For properties that require such insurance, this could potentially mean a doubling of the premiums on flood policies. As this coverage is usually mandated by lenders, properties will find themselves forced to absorb the increased operating cost negatively impacting Net Operating Incomes. However, there are a few measures managers and owners alike can take to mitigate the costs of insurance premiums:
1. Letter of Map Amendment (LOMA): if you have evidence that a building on your property was erroneously placed in a Special Flood Hazard Area (SFHA) thereby requiring you to obtain flood insurance you can request a LOMA from FEMA which would effectively remove it from the SFHA and eliminate the need for flood insurance. In many instances only one or two corners of a building may lie at an elevation low enough to place it within the SFHA. With a little grade work, you can raise the elevation and obtain a LOMA. It is relatively inexpensive to hire a surveyor to read building elevations at each corner to determine the degree with which it lies in the SFHA
2. Elevation Certificates: obtaining an elevation certificate requires multiple building measurements including the elevation of utilities, basement elevations, square footage of basements/crawl spaces etc. Without an Elevation Certificate buildings are required by default to carry maximum building coverage. With Elevation Certificates, you can often qualify for reduced building coverage therefore lowering premiums
3. Engineered Flood Openings: for buildings built on slab foundations or with narrow crawl spaces, installation of engineered flood openings can effectively reduce building coverage requirements by up to 80%. These “flood vents” basically help reduce water pressure on the foundation during a flood event by permitting water to pass through/into the buildings. For more information, visit www.smartvent.com
When attempting to reduce insurance premiums via any or all of the above methods, it is helpful to work with a survey company experienced with FEMA, the local municipalities, and the aforementioned strategies. Most of the increased coverage requirements will go into effect at the next policy renewal, so now is the time to start considering means by which you can reduce the coverage requirements.