What is A Flood Zone?

 

People love to be near the water. Whether it’s a river, lake, or the sea, a body of water makes for a beautiful landscape and many fun activities. Unfortunately, these bodies of water can also cause flooding. Flooding can happen at any time no matter where you live, so it is important to get educated about floods and flood zones. It’s Flood Zone Awareness Week; read on to learn more about these natural disasters and your risk.

Flooding Statistics

• Floods are the #1 natural disaster in the United States, causing more deaths and damage than tornadoes and hurricanes.
• The average annual cost of damage due to flooding in the United States is over $2 billion.
• The most flood insurance claims in 2012 were received from Louisiana residents.
• Texas is the state with the most flood related deaths in the last 36 years.
• Flash floods are the most dangerous type of flooding.
• Most flood-related deaths are due to people trying to drive in flooded areas.
• Causes of flooding include heavy rainfall, melting snow, and building or structure collapse.

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What Is the Definition of a Flood Zone?

A flood zone is an area designated on a Flood Hazard Boundary Map. These geographical areas are given a specific rating depending on the estimated flood risk. A flood zone will determine how much flood insurance will cost, and whether or not it is mandatory to carry flood insurance.

• A: Flood zones that start with A are considered to be at high-risk for flooding. These areas are usually along ponds, rivers, and streams.
• B or shaded X: These flood zones are considered to be moderate risk areas.
• C or un-shaded X: These areas are considered to be at low risk for floods.
• V: These areas have not been evaluated for flood risks.

The designation V is used for high-risk coastal areas, which may receive damage due to flooding and strong waves in storms.

More Flood Terminology

Coastal Barrier Resource System (CBRS): These are areas of restricted development along coastlines. These designated areas provide essential barrier protection against flood damage to inland areas.

Flood Insurance Rate Map (FIRM): A map that shows the flood zones and floodplain boundaries for your community. These maps are regularly updated, so talk with an insurance agent to get the most updates FIRM for your area.

National Flood Insurance Program (NFIP): The NFIP is a standardized insurance program, established by FEMA and offered through insurance agents. As property insurance does not cover flooding, purchasing NFIP flood insurance is the only way to protect yourself financially in the event of flood damage. There is a 30-day waiting period for flood insurance to take effect. This means you cannot buy flood insurance the day before flooding is predicted and expect to receive coverage.

Special Flood Hazard Area (SFHA): Also known as floodplains, these are areas of land that are designated by FEMA to be at a high risk for flooding.

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How Do I Find Out My Flood Zone Designation?

There are a few different ways to find out your flood zone designation and risk. One way is to ask a local insurance agent, as these agents have access to the latest Flood Insurance Rate Maps. If you are looking to buy a new house, be sure to talk with your agent and your realtor about the flood zone risk of the property before you move in. If you own a home or other property, the flood zone might be listed on the title. If these methods won’t work for you, you can always go online to find flood maps. Many state or city websites will have flood maps of local areas for residents to view. FEMA, the Federal Emergency Management Agency, also has flood maps available through their website.

For a more personalized assessment, you can hire a surveyor to assess your home for flooding risk. A surveyor will use many different factors to assess your individual risk, including your proximity to bodies of water, your home’s foundation, and the age of your home.

Do I Have To Carry Flood Insurance?

Depending on where you live, flood insurance may be mandatory. In an A or V flood zone, flood insurance is required. These are typically areas that are coastal, directly on the waterfront, or near a river. It could also be an area that receives a high amount of rain throughout the year. Moderate and low risk areas may not require you to carry flood insurance, but depending on the weather and the proximity of the area to bodies of water, it might be a good idea to carry flood insurance anyway.

Flood insurance covers rising waters and flood damage, as well as flooding from hurricanes. Homeowners insurance, condo insurance and mobile home insurance do not typically cover flood damage.

Can I Protect My Business with Flood Insurance?

In addition to residential flood insurance, commercial flood insurance is available. This insurance protects businesses in case of a flood. Flooding damage can quickly cause over $75,000 of damage to a commercial business. Many businesses are unable to reopen after a severe flood if they don’t have flood insurance to cover the expenses for cleanup, repairs, and replacement of damaged business collateral, equipment and furniture. If you own a business or commercial property, adding this insurance is smart, especially if you are in an area known to be a flood zone.

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Do Flood Zones Change?

Knowing your current flood zone is one thing, but you need to stay updated on any changes in your risk of floods. Environmental changes, new construction, or recurring weather patterns can change your flood zone rating. Changes to your flood zone can lead to higher insurance premium costs. It’s important to reexamine your flood zone risks from time to time to avoid any surprises.

Flooding can happen in any area, from a coastal seaside home to a business in the middle of the desert. While the chances of flooding in certain areas may be low, a “no risk” flood zone simply does not exist. Keep yourself informed about flood zones and your insurance options to get the most protection from this type of natural disaster.

New Developments & Flood Risk

Floods are often associated with rivers and streams overrunning their banks, or with heavy rains from hurricanes and other major storms, and while those are very real hazards, the reality is that flooding can be caused by a number of factors that you may not have considered. One factor to consider when evaluating your risk of flooding is development and new construction in your area.

A development project or new construction can drastically alter how the ground in the area is able to absorb water from rain or melting snow, particularly when the ground around the project is cleared of trees and other brush that help absorb ground water, or if the project has large paved areas, like parking lots, that could impact drainage and run-off. This could be true whether it’s a relatively small project like a new home being built next door to something much larger, like a shopping center which may be large enough to impact flood risk for an entire neighborhood.

If you’re doing the “weekend warrior” thing and working on any major gardening or landscaping projects, keep in mind that you don’t want to inadvertently increase your flood risk. For hardscape surfaces such as patios and paths consider using semi-permeable materials such as flagstones or gravel that will allow ground water to drain, rather than collect (which it might if you were to pave these areas). Manage storm water and runoff by planting vegetation that can help absorb water, and try to avoid projects that would cause water to drain back towards your home.

The reason it’s so important to be aware of these risks is that flood damage is specifically excluded by homeowners and renters insurance policies. Flood insurance coverage, though, is available through independent insurance agents as a separate policy from the National Flood Insurance Program (NFIP), a federal insurance mechanism. In the 1960s, taxpayers often had to “bail out” flood victims, and Congress created the NFIP to make flood insurance available in communities that adopted floodplain management laws to reduce flood damage.

If you own or rent property in low- or moderate-risk flood areas, you can buy flood insurance, and may be eligible for a lower-cost preferred risk flood policy. Unlike homeowners insurance, flood insurance typically has a waiting period. The NFIP sets a standard 30-day waiting period before flood coverage goes into effect, though it’s important to discuss this with your insurance agent to understand what the exceptions to the waiting period are and whether the waiting period would apply to your specific situation. If there’s new development in your neighborhood, it could impact your risk. An independent insurance agent can help you sort out the coverage options, understand what the policy will and won’t cover and can help you get a policy through the NFIP.

What Is Covered By a Builders’ Risk Policy?

A builders risk policy is a specialized type of property insurance designed to cover damage to buildings while they are in the process of being constructed, renovated or remodeled. It typically covers materials, equipment and fixtures in the event that any of these items suffers physical damage or loss during construction operations and may extend to cover materials and equipment during storage and transit to the job site.

Since there is no standard builders risk policy applicable in all situations, each contract is drawn up to outline the specifics of the coverage contained therein. There are two generalized types of coverage available:

1. Specified Perils – also called Named Perils, this covers only losses specified in the policy
2. Special Perils – most expensive but also most inclusive. This covers all losses except those specifically excluded

What’s Covered and What’s Not

Like any type of insurance, a builders risk policy can be written to cover just about any type of loss as long as a written agreement is executed between the insurer and the insured and the appropriate policy premium amount is paid. Earthquake and flood damage, for example, are almost always excluded in basic policies but, for an additional premium amount, these can normally be added if desired. Besides flood and earthquake damage, other types of losses often excluded from a typical builders risk policy include:

• Defects in design or construction
• Mold
• Pollution
• Settling, shrinking or cracking
• Intentional damage by the policyholder
• Terrorism
• Insect or vermin damage

Losses traditionally covered include damage caused by fire, wind, lightning strikes or explosions. Theft of materials stored onsite may or may not be covered, depending on the policy, and some policies may require you to have a secure storage area. Building collapse is also something that may or may not be covered, depending on the individual policy.

Coverage Add-Ons and Limitations

Liability coverage for protection against bodily injury or damage to the property of other parties is normally not covered under a builders risk policy. The addition of a loss of income clause, however, is not uncommon in certain situations. An example of this would be a hotel that suffers significant damage just before completion and the opening of the business is delayed substantially, causing a major loss in projected business income. This is a type of loss for which a special provision within the policy can provide coverage.

If you have occasion to make a claim under your builders risk policy and the amount paid is less than expected, it’s probably  because, by default, claims are typically paid according to Actual Cash Value rather than Actual Replacement Costs. Unless your policy specifies that it will pay Actual Replacement Costs for any loss claimed, the amount paid will be depreciated to the lesser amount. When going over your policy make sure to check this detail.

Who Should Obtain Coverage and Why

Buildings are subject to a variety of risks during construction operations and a quality builders risk insurance policy can minimize the exposure to unexpected setbacks. The policy may be purchased by a custom builder, a general contractor or by the property owner. Coverage is meant to protect throughout the construction phase and to terminate when the building has been completed and is ready for occupancy. The amount of coverage will generally be in line with the total cost of labor and materials involved, with an upside limit of the total valuation of the completed project. As the construction process proceeds, the value of the existing structure in its present condition will be constantly changing, adding to the complications involved in underwriting precise coverage.