Have you been informed by your lender or insurance company that your home or business requires flood insurance?
So why is insurance required by your lender? The National Flood Insurance Reform Act of 1994 was aimed at increasing compliance with flood insurance requirements. This act says if you live in a community that participates in the National Flood Insurance Program (NFIP) and your home or business is in a Special Flood Hazard Area (SFHA) your lender has no choice but to require you to carry flood insurance. The SFHA is the area that has at least a 1% chance annually of flooding. Whether or not you are in a SFHA is determined by the current effective FEMA Flood Insurance Rate Map (FIRM). The FIRM has shaded areas that are labeled as an "A" or "V" zone. If a structure is located geographically in one of these "A" or "V" zones then it is considered in a SFHA. Look at the different zones on the FIRM as being 2-Dimensional. If the structure is drawn on the flood map and any part of it touches the SFHA, it is considered in and flood insurance is mandatory. It may sound strange but elevation is not factor when determining the flood insurance requirement.
After hearing from the lender that flood insurance is required the next question many times is, "What if I have any elevation certificate that shows my house is above the base flood elevation ". Even with this being the case, regulations do not allow the lender to waive the flood insurance requirement. The current FIRM is the legally binding document... even if it's in error according to the elevations shot by an engineer or surveyor.
IT'S NOT THE LENDER'S FAULT. Don't get upset with your lender because they are enforcing the FEMA ordinance. They have no choice otherwise they can be fined for being out of compliance. You do however have the right to have the lender double check the determination to make certain it was completed correctly the first time. Almost all lenders use a third party flood zone determination company to make the determination so the lender needs to contact them to have it double checked.
What now? You may simply be in a SFHA and flood insurance is necessary. In these cases you will need to obtain the adequate coverage and rest easy that you are covered in the event of a flood. If you believe the FIRM is inadvertantly showing your structure in the SFHA you do have an option. A Letter of Map Amendment (LOMA) is a document issued by FEMA stating that even though a structure is shown in a SFHA on the FIRM, it has been determined that the lowest adjacent grade is at or above the base flood elevation (BFE) and it is actually not in the SFHA. When this occurs it is a considered a "Removal Letter". This is an official amendment to the FIRM by FEMA and lenders can use it to waive the flood insurance requirement.
How does one get a LOMA? You will have to provide FEMA with a completed elevation certificate showing the structure elevations and the BFE. The elevation certificate must be completed by a licensed surveyor or engineer. This is where FEMA's policy of "the burden of proof is on the homeowner" comes into play. You have to prove that the flood map is incorrect. The elevation certificate is going to cost $400 and up. Prices vary depending on factors such as whether or not there are elevation benchmarks near the structure. Once you have the elevation certificate completed you will be able to compare the lowest adjacent grade to the BFE. The lowest adjacent grade must be at or above the BFE. This is all that FEMA looks at. Your finished floor elevation can be 5 feet above the BFE, but if the lowest adjacent grade is below you will not be approved. If the lowest adjacent grade is not at or above the BFE you must obtain flood insurance. At this point there is no way of getting around it and frankly you need it anyway.
You can apply for the LOMA after obtaining flood insurance. Many times it's necessary to close your loan if you are trying to avoid losing a good rate. In this case you do have to get the flood insurance, at least for the time being. If you are successful in your LOMA application to FEMA you are entitled to receive a full refund of premiums paid for the current policy year. In some cases the current and previous year premiums may be refunded if you have carried insurance for a longer period of time.
