The bottom line on insurance – what are your options

Who will be required to purchase flood insurance?

All property owners should consider investing in flood insurance to reduce their financial risk because, in fact, more than 20 percent of flood insurance claims come from people with homes located outside of areas mapped as high-risk.

While it is recommended that all structures carry flood insurance, all structures mapped in high-risk flood zones are required to have flood insurance if they have a federally backed loan. The National Flood Insurance program (NFIP) often provides flood insurance in places where traditional for-profit insurance companies choose not to offer policies.

However, Mother Nature doesn’t carry a flood map, so there is always a risk of flooding whether your home is in an area identified as a high-risk or not.

While property owners with a lower risk of flooding are not required to purchase flood insurance, it is still recommended to obtain lower-cost flood protection to protect their properties. Even though a home is shown in a lower-risk area, that means that the risk has only been reduced – not removed. Therefore, we encourage anyone whose property lies close to a high-risk zone to purchase flood insurance, albeit at a much-discounted rate.

What is the National Flood Insurance Program?

Most private insurance companies have pulled out of providing flood insurance in high-risk areas. As a result, Congress saw a need to step in and help protect Americans who may be in harm’s way, the result was the National Flood Insurance Program or NFIP.

The NFIP is a federal program that is focused on reducing the impact of flooding on private and public structures by providing insurance to property owners, encouraging communities to adopt and enforce floodplain management, and promoting the development of new structures in areas with lower flood risks.

While it is recommended that all structures carry flood insurance, all structures mapped in high-risk flood zones are required to have flood insurance if they have a federally backed loan. The NFIP often provides flood insurance in places where traditional for-profit insurance companies choose not to offer policies.

To participate in the NFIP, a community must take steps to adopt and enforce floodplain management regulations and ordinances to reduce future flood hazards. In response, the federal government makes flood insurance available to the community as a financial protection against flood losses. The insurance is designed to provide an alternative to disaster assistance and to reduce the escalating costs of repairing flood damage to buildings and their contents.

Why is it important for our community to be a part of the National Flood Insurance Program (NFIP)?

The most economical way – and sometimes the only way – for homeowners and business owners to have flood insurance is to continue being active participants in the NFIP. Adopting these updated flood maps and enforcing floodplain management regulations are also a part of being participants in the NFIP.

The programs offered to communities participating in the NFIP help keep their residents safer, minimize property damage, and provide the cheapest flood insurance to residents.

Why do I need flood insurance if I’ve never seen a flood on my property?

Unfortunately, as most of us know, we experienced a major flooding event in 2011 that no one could have anticipated. A combination of factors led to many properties experiencing flooding for the first time.

If your home is mapped in a high-risk floodplain, it is because the updated analysis shows that each year you have a 1-percent chance of having your property hit by a significant flood. To put this into context, homes in your area have a 26 percent chance of flooding over the life of a 30-year mortgage.

The reason we recommend flood insurance for everyone is that 20 percent of all claims for flooding events come from outside of the high-risk areas. This means that one out of five claims come from property owners who thought they were “safe” from flood risk.

Can I reduce my insurance premiums – and, if so, how?

Absolutely. When you reduce the risks to your property, your insurance premiums will be reduced as well.

Ward County and the City of Minot have already taken measures that exceed the requirements set by FEMA’s Community Rating System (CRS), resulting in countywide discounts on flood insurance. Ask your insurance providers for more information on other discounts.

Homeowners can also take matters into their own hands by reducing the risk of flooding for their homes to reduce their insurance premiums. For example, one way to reduce the insurance premium on your home is to raise any machinery or equipment that services your home above the base flood elevation (BFE). Another way to reduce your insurance premium is to add small openings called flood openings to your foundation if your home does not have a basement.

There also are also a few solutions that we recognize are not inexpensive but are highly effective. For instance, you can fill in your basement with pea gravel, raise your home above the BFE, and in extreme situations relocation is an option.

What is the Community Rating System?

Every year, flooding causes hundreds of millions of dollars worth of damage to homes and businesses around the country. The NFIP’s Community Rating System (CRS) was implemented in 1990 as a voluntary program for recognizing and encouraging community floodplain management activities exceeding the minimum NFIP standards.

Nearly 1,400 communities across the country participate in the CRS, including Ward County, the City of Minot, Burlington, and Sawyer. The CRS ranks communities on a scale of 1-9, and each level offers an increasing discount on flood insurance for policy holders.

Under the CRS, flood insurance premium rates are discounted to reward community actions that meet the three goals of the CRS, which are:

  • To reduce flood damage to insurable property
  • To strengthen and support the insurance aspects of the NFIP
  • To encourage a comprehensive approach to floodplain management

What is “Grandfathering”?

When flood map updates occur, the NFIP provides a lower-cost flood insurance rating option known as “grandfathering.” It is available for property owners who already have flood insurance policies in effect when the new flood maps become effective and then maintain continuous coverage and have built in compliance with the Flood Insurance Rate Map (FIRM) in effect at the time of construction. One major benefit to obtaining a grandfathered insurance rate is that it can be transferred to the new owner of the property if it is sold.

Timing is the most important factor in being able to be grandfathered into an insurance premium. Owners of most pre-FIRM buildings (buildings that were built before the first flood map became effective) have only one chance to grandfather and lock in the existing zone for future rating. For a pre-FIRM property in a high-risk area that is mapped into a higher-risk zone (e.g., Zone AE to Zone VE), the last chance to qualify for grandfathering is to buy or renew a policy at least 30 days before the new FIRM becomes effective.

If a building has been substantially damaged or improved, it is not eligible to be grandfathered to the FIRM in effect at the time of the structure’s original construction date. The FIRM in effect at the time of the last substantial improvement or damage must be used.

If you have any questions regarding grandfathering into your current zone ahead of the updated Flood Insurance Rate Maps becoming effective, please reach out to Amber Turnquest with Ward County at 701-838-0767 or Lance Meyer with the City of Minot at 701-857-4100.