introduction And General Rules - H2o Partners · 2 Here’s our AGENDA • Section 1 –...

1

Welcome to

The NFIP’s Basic Agent Tutorial:

Key Fundamentals of Flood Insurance

Focused on flood insurance basics for insurance professionals

(Part 1)

1

a

INTRODUCTION AND

GENERAL RULES

Section 1

3

2

Here’s our

AGENDA

• Section 1 – Introduction and

General Rules

• Section 2 - Policy Rating,

Elevations, Premiums and More

• Section 3- Coverage, limitations

and Exclusions in the SFIP

• Section 4- Loss Settlement

Provisions

• Section 5- Flood Insurance

Resources

This course is divided into two sessions

Each session is approximately 2 hours 4

Access the NFIP Flood Insurance

Manual:

• Online at the Flood Insurance

Library: http://www.fema.gov/flood-insurance-manual

5

NFIP Flood Insurance Manual

http://www.fema.gov/flood-insurance-manual





3

6

Training Agenda

Things Agents

Need to Know

Every building is in a flood zone.

Flood insurance can be purchased in any flood zone

– not just high-risk flood zones.

Building and contents coverage limits are usually

purchased separately.

A federal disaster declaration is not

required for a policyholder to

file a flood insurance claim .

The Standard Flood Insurance

Policy (SFIP) is not a guaranteed

replacement cost policy.

The SFIP provides limited coverage for basements.

The SFIP excludes time-element

exposures.

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3

4 5

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NFIP definition of “flood”

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What is a flood?

4

NFIP definition of “flood”

• A general and temporary condition

of partial or complete inundation of

two or more acres of normally dry

land area or of two or more

properties (one of which is your

property) from:

a. Overflow of inland or tidal waters,

b. Unusual and rapid accumulation or

runoff of surface waters from any

source,

c. Mudflow.

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What is a flood?

Mudflow

• A river of liquid and flowing mud

on the surface of normally dry

land areas as when earth is

carried by a current of water

• Not Mudflows:

• Landslide

• Slope failure

• Saturated soil mass

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What is a flood?

Source: www.floodsmart.gov

5

Flood Related Erosion

• Collapse or subsidence of land

along the shore of a lake or

similar body of water

• Caused by waves or currents of

water exceeding cyclical levels

• Results in flooding

What is a flood?

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• All Property Owners

• All Zones

Who has

flood risk?

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6

SFHAs and Non-SFHAs

Special Flood Hazard Areas (SFHAs)

• High Risk Zones

• AE (replaces A1-A30)

• A, AH, AO, A99, AR

• VE (replaces V1-V30), V, VO

Non-Special Flood Hazard Areas (non-SFHAs)

• Low to Moderate Risk Zones

• B, C, X

• D (undetermined)

100-year floodplain = 1% annual chance flood

Over 30-year mortgage likelihood grows from 1% to at least 26% 13

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Training Agenda

SFHAs appear as dark shading on a Flood Insurance Rate Map (FIRM).

Flood Insurance Rate Map (FIRM)

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Digital Flood Insurance Rate Map (DFIRM)

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Locating flood maps: https://msc.fema.gov/

FEMA Map Service Center

https://msc.fema.gov/

https://msc.fema.gov/

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How does the NFIP Work?

How is NFIP flood

insurance purchased?

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• Community Participation

• All Zones

Who can buy NFIP

flood insurance?

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Participating Communities

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FEMA

agrees to make flood insurance

available

COMMUNITY

agrees to adopt and enforce floodplain management regulations

Community Status Book Report

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https://www.fema.gov/national-flood-insurance-program-community-status-book















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Buildings may be ineligible for coverage in

participating communities,

If constructed on or after identification date.

CBRS System Ability to write NFIP policies may

be restricted in some:

• Coastal Barrier Resources Act (CBRA) areas

• Otherwise Protected Areas (OPA)

• Coastal Barrier Resources Act and Coastal Barrier Improvement Act enacted:

• October 18, 1982

• November 16, 1990

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• Write Your Own Company

• NFIP Direct Servicing Agent

• Licensed Property and

Casualty Agent

How is NFIP flood

insurance purchased?

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11

A or V Zones

Who MUST buy flood

insurance?

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Used as security for a loan

Who MUST buy flood

insurance?

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12

Designated Loan

Who MUST buy flood

insurance?

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Please note: Emphasis on a “building or

mobile home” as collateral

What is a

designated loan?

. A loan secured by a building or

mobile home that is located or to

be located in a “Special Flood

Hazard Area” in which flood

insurance is available under the

Act

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13

Flood Insurance

vs.

Disaster Assistance

Who SHOULD buy

flood insurance?

29

Flood Insurance vs. Disaster Assistance

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14

NFIP maximums vary by

building type and program limits

How much NFIP

flood insurance can

be purchased?

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How much flood insurance coverage is available?

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Emergency Program Regular Program

Residential (1-4 family)

Building

Contents

$35,000

$10,000

$250,000

$100,000

Other Residential

Building $100,000 $500,000

Non-Residential Business/Other Non-Residential

Building

Contents

$100,000

$100,000 $500,000

$500,000

Contents $ 10,000 $100,000

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• 30-day waiting period

• Exceptions

When does an NFIP

policy become

effective?

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For detailed information, please see the

General Rules section of the Flood Insurance Manual

When does an NFIP policy become effective?

• There is a 30 day waiting

period before new or

modified flood insurance

policies go into effect.

• Exceptions are provided

for:

Insurance in connection with a loan transaction.

(MIRE)

Insurance purchased within 13

months of a map revision

(1-day wait).

Wildfire exception

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KEY NFIP TERMS, TOOLS,

AND RULES

To use and to live by…

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Defining Pre-FIRM and Post-FIRM

Post-FIRM

On or After the initial FIRM or After 12/31/1974 . . . whichever is LATER

Pre-FIRM

Built before initial FIRM or

On or before 12/31/1974

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Full-Risk Rates vs. Subsidized Rates

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Represent the building’s true flood risk.

Premium reflects the risk assumed by the program and all administrative expenses.

Takes into account the full range of possible flood losses.

Do not represent the building’s true flood risk.

Determined with limited underwriting information

Discounted rates that have traditionally been available for Pre-FIRM buildings in A or V zones.

Full

Ris

k R

ates

Su

bsid

ized

Regular vs. Emergency Program

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• Initial participation phase

• Limited amount of coverage

• Flood Hazard Boundary Map (FHBM)

Emergency

Program

• Final phase of participation

• Full limits of coverage

• Flood Insurance Rate Map (FIRM)

Regular Program

18

Base Flood Elevations (BFEs)

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BFE = 1% Chance Flood

Preferred Risk Policy

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Preferred Risk

Policy

Lower Cost

B,C,X, A99, AR Zones

General Property

Form

Dwelling Form

19

Miscellaneous NFIP Rules

42

Rules

NFIP Policy Term

• 1 year annual term

• All policies

• NFIP Direct

• Write-Your-Own

Evidence of Insurance

• Flood insurance application & premium payment

• Copy of declarations page

• No binders

Community Participation

• Probation

• Suspension

• Special Flood Hazard Areas are

represented on flood maps as zones A or V.

• NFIP flood insurance can be purchased in

communities participating in the NFIP

regardless of the flood zone.

• Licensed property & casualty insurance

agents write NFIP policies through either

private sector Write-Your-Own carriers or

the NFIP Servicing Agent.

• NFIP policies are rated using either

subsidized or full-risk rates.

Key Takeaways

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Together We Can Help

Property Owners Recover from Flooding

FEMA recognizes the need to increase flood insurance coverage across the nation. At a national

scale, estimates lead us to believe as little as one-third of the residential properties in the Special

Flood Hazard Areas have National Flood Insurance Program policies.

“Yet flooding can happen anywhere. Floods are not wholly contained within the SFHA. Over the

past ten years, approximately 20 percent of all NFIP claims came from low to moderate-risk

policyholders.

“Flood insurance facilitates the ability of a property owner or renter to recover after a flood,

whether the insurance is provided by the NFIP or private insurers. FEMA recognizes that there

is a growing interest by private insurers to offer flood insurance protection. FEMA supports this

because an insured survivor – regardless of where they purchase their coverage – will recover

more quickly and more fully.

“FEMA is looking for ways to increase the flood insurance coverage nationally, and more

specifically, double the insurance coverage over the next 5 to 7 years. You, as the agent, are the

front lines in this, and we ask that you continue to explore ways to support this goal.”

“

Why is it Important

to Grow Your Flood Business?

It can and does flood anywhere and everywhere in the United

States.

By some estimates only one-third of residential property owners in

Special Flood Hazard Areas have NFIP policies.

Over the past decade, approximately 20% of all NFIP claims came

from low to moderate-risk areas.

Flood insurance facilitates the ability of a property owner or renter to

recover after a flood, whether the insurance is provided by the NFIP

or private insurers.

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6 Simple Steps

To Grow Your Flood Business

Quote flood insurance every time you quote new business for any property coverage

Utilize the Preferred Risk Policy – low-to-moderate risk areas

Offer flood insurance at each renewal

Target Special Flood Hazard Areas in your marketing territory – consult on mandatory purchase

Establish agency growth goals for flood

Solicit commercial opportunities to write flood - help small business-owners recover

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Achieve your

goals

Quote flood insurance every time

Utilize the Preferred Risk Policy

Offer flood insurance at renewal

Target SFHAs in your territory

Establish agency growth goals for flood

Solicit more commercial opportunities

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POLICY RATING, ELEVATIONS,

PREMIUMS AND MORE…

Section 2

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Case Study Facts Your client has just purchased a home in unincorporated Palm

Beach County, Florida and he approaches you to buy a flood

insurance policy that is required by his lending institution since

the house is in flood zone AE.

About the home It is a single family dwelling with a detached

garage that will be his primary residence. The

house was built in 1995. It is a two-story house

and, like most homes in Florida, it does not have a

basement.

How much flood insurance to buy Since the house and its garage have a replacement

cost value well above the NFIP’s $250,000 single

family maximum building limit, the new

homeowner wants to buy the maximum amount of

coverage on the building along with $100,000

worth of coverage for his personal property.

Information to gather What do you need to know in order

to provide your client a quote?

Let’s take a look at the information

you would need to gather; how you

use and interpret it; and we’ll go

step-by-step to develop your

client’s quote.

Palm Beach County Rating Case Study

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Rating Elements

Single family dwelling with detached garage

Two-story home with no basement

Built in 1995 in Palm Beach County, FL

Flood Zone – AE

$250,000 – Building Coverage

$100,000 – Personal Property Coverage

Minimum deductibles


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Step 1

Determine Pre-FIRM or Post-FIRM status

Utilize Community Status Book

















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Case Study Talking Points

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`


Case Study Talking Points

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Community Status List

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Step 1

Determine Pre-FIRM or Post-FIRM status

Utilize Community Status Book

Initial FIRM Date: 2/01/1979

Year Built: 1995

Post-FIRM Building
















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Step 2

Locate a FEMA Elevation Certificate

Blank Elevation Certificate Form


• Lowest Floor Elevation

• Elevation Difference

What is meant by

elevation?

62

http://www.fema.gov/media-library/assets/documents/160

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• Elevation difference refers to the

height of a structure relative to

BFE

• A structure above BFE is less

likely to experience flood damage

• Less risk = lower premiums

63

Elevation

Difference

• Anticipated floodwater rise

• Regulatory requirement for

elevation or floodproofing

What is a Base Flood Elevation?

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Base Flood Elevation

What is a

Base Flood Elevation?

• Base flood is a flood that

has a 1% chance of being

equaled or exceeded.

• BFE is the expected

height of that 1% chance

of flood

Lowest Floor Elevation

66

BASEMENT

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Elevation

Certificates (EC)

• An EC includes important

information for determining a risk-

based premium

• EC shows:

• Location of the building

• Lowest floor elevation

• Building characteristics

• Flood zones

• Base flood elevation

• See building diagrams in the NFIP

Flood Insurance Manual or the EC

instructions

Why are Elevation

Certificates used?

69

• An Elevation Certificate:

• Certifies building elevation

• Documents community

compliance

• Determines policy rates

• Supports map revisions and

amendments

How are Elevation

Certificates used?

30

• A surveyor, engineer, or architect

must certify the building elevation

• Insurance agents use this

information for rating

70

Who Completes an

Elevation Certificate?

• Where to locate an Elevation

Certificate for a building:

• Ask the local floodplain manager

• Ask the sellers

• Ask developer/builder

• Check the property deed

• Hire a licensed land surveyor,

professional engineer or certified

architect

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Where to find an

Elevation Certificate?

31

Use of Elevation Certificates

FEMA Elevation Certificates

72

Pre-FIRM Construction (SFHAs)

Not Required: Pre-FIRM subsidized rating Required: Full-risk rating approach

.

Non-SFHA zones (B, C, D, and X)

Elevation certificates not required

Post-FIRM Construction (SFHAs)

Elevation certificates are required

FEMA Elevation Certificate

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EC Sections – A thru F

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EC Sections

Section A Section B Section C Section D Sections E,F


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EC Sections

Section A

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EC Sections

Section B


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EC Sections

Section C

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EC Sections

Section D


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EC Sections

Sections E & F

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Building Diagrams

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Building Diagrams

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Building Diagram 1A

Elevation Certificates:

Who Needs Them and Why Click here for on-line version

How an EC is used

Who needs an EC

Where to get an EC

When you need an EC

When you do not need an EC

Useful terms

Resources

EC Fact Sheet

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https://www.fema.gov/media-library-data/1428941960043-a8f37b7e3af25f47396bbff04e7bf036/FEMA-HFIAA_ECFActSheet_040715.pdf



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Step 3

Utilize FEMA Elevation Certificate

Determine Elevation Difference



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EC Sections

Palm Beach County* - 120192 Palm Beach County FL

AE 13.0

Single family dwelling | 2-story home - no basement | Built in 1995 in Palm Beach County, FL Post-FIRM construction | Flood Zone – AE | Diagram 1A – slab on grade

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EC Sections

Palm Beach County* - 120192 Palm Beach County FL

AE 13.0

Single family dwelling | 2-story home - no basement | Built in 1995 in Palm Beach County, FL Post-FIRM construction | Flood Zone – AE | Diagram 1A – slab on grade

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Step 3

Utilize FEMA Elevation Certificate

Determine Elevation Difference Palm Beach County Case Study

Elevation Difference: +1

Lowest Flood Elevation: 14.1

Base Flood Elevation: 13.0

Elevation Difference: +1.1

Rounds down: +1.0


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Step 4

Determine Rating Approach

Subsidized rating vs. Full-risk rates


Reform Legislation Impact

90

25%

Annual Increases *Limits increases to

18%

• Individual premium increases

• Includes Reserve Fund Assessment

• Does not include:

• HFIAA surcharge

• Federal Policy Fee

Limits increases to 18%

• Subsidized rates for:

• Non-primary residences

• Business properties

• Severe repetitive loss

• Substantially Damaged Substantially Improved

25% Annual Increases

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Impact of Biggert-Waters Reform Act

91

How are premiums changing?

As of January 1, 2013

• Non-primary residences*

• Subsidized rates increase 25% per year upon renewal

• Until they reach full risk-rate

Subsidized 25% 25% 25%? 25%? Full Risk

Rates

*A non-primary residence is a single family dwelling, condominium unit, apartment unit, or unit

within a cooperative building that will not be lived in by the policyholder or the policyholder’s

spouse for more than 50% of the 365 days following the current policy effective date. A

policyholder and the policyholder’s spouse can have more than one primary residence provided

they submit the required supporting documentation for each residence. (See Flood Manual for

complete details)

Impact of Biggert-Waters Reform Act

92

How are premiums changing?

Effective April 1, 2016

• Subsidized rates increase for:

• Business properties (non-residential)*

• Subsidized rates increase 25% per year upon renewal

• Until they reach full risk-rate

Subsidized 25% 25% 25%? 25%? Full Risk

Rates

*A non-residential business is a building in which the named insured is a commercial enterprise primarily

carried out to generate income and the coverage is for:

• A building designed as a non-habitational building

• A mixed use building in which the total floor area devoted to residential uses is:

• 50% or less for single family

• 75% or less for all other residential properties

• A building designed for use as office or retail space, wholesale space, hospitality space or for

similar uses

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Subsidized Rates

$4,795/yr

$4,795/yr

$4,795/yr

$618/yr

$11,785/yr

$4,531/yr

Full-Risk Rates

Pre-FIRM Post-FIRM

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4 ft below BFE

1 ft below BFE

4 ft above BFE

*AE Zone (04/01/18 rates) Bldg- $250,000 Contents- $100,000; Primary Residence, Single-story with no basement, crawlspace or enclosure rates; Zone AE; $2K deductible Bldg./Contents

93

Clear

Communication

of Risk

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Access on-line at:

www.fema.gov/cost-of-flood

http://www.fema.gov/cost-of-flood





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Clear

Communication

of Risk

95

Access on-line at:


Clear

Communication

of Risk

96

Access on-line at:












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“Let me get back to you with a quote!”

Palm Beach County

Rating Case Study

• Single family dwelling with

detached garage

• 2-story home - no basement

• Built in 1995 in Palm Beach

County, FLX

• Post-FIRM construction

• Flood Zone – AE

• +1 Elevation Difference

• $250,000 – Building

• $100,000 – Personal Property

• Minimum deductibles

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• Pre and Post-FIRM determinations can be

made using the NFIP Community Status

Book.

• Elevation difference is defined as the

difference between a building’s lowest floor

and the Base Flood Elevation.

• FEMA Elevation Certificates are required

when using full-risk rates on buildings in

Special Flood Hazard Areas.

Key Takeaways

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• Melanie Graham [email protected]

• Mike Moye

[email protected]

• Rich Slevin

[email protected]

• Rich Waalkes [email protected]

• Aaron Montanez/Will Lucas [email protected]

Contact Info

100

Thank you for attending!

101

mailto:[email protected]





introduction And General Rules - H2o Partners · 2 Here’s our AGENDA • Section 1 –...

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