Home in Flood Plain – Deal breaker?
Brax P in Phoenix, Az – Hey flood nerds! I am currently under contract to buy a home in Arizona. The home within close distance to a street that is designated as a flood plain AE which has a 1% of flood annually and is high- risk. How do I get a quote for flood insurance? I am asking my current ins agent to provide but have heard quotes as low as $500 annually or $10,000 depending on how high above the home is of the Base Flood Elevation (BFE). I got a quote for a survey to get a flood elevation certificate but its $400… not sure if thats worth it yet. Any advice would be greatly appreciated!!
Flood Nerd answer.
What a great question Flood Insurance always seems to be a hot topic. The question of is a property in a flood zone or out is always the question. Know that many times developers will work with a community to get the new development mapped out of the high risk flood zone (Aka 100 year flood zone). Because it is easier to sell the property so whether or not a property is in the high risk flood zone or not doesn’t necessarily say whether or not the property is safe from flooding.
On that note there is a very real reason that none of our domestic insurance companies (Allstate, State Farm, Geico, Progressive, on and on) will cover flooding – this is because they know that any property (and I do mean any property) has a 20% of flooding so they don’t want to cover it and it is excluded in the policy language (under exclusions).
On top of that the government knows that flooding is the #1 natural disaster that the US faces (although this Covid thing might over take it for the short term). And since the domestic insurance companies wouldn’t/couldn’t cover the risk of flooding in 1973 the government started the National Flood Insurance Program (NFIP) which is managed by FEMA and this program enjoyed a monopoly of 50 years. The intent of the program was to help cover properties that were in high risk flood zones at that time. But over the years builders (using the strategies I previously outlined) decided that building in high risk flood zones was a good plan (AKA every beach property or property built right on large body of water including rivers) because the government will bail out the property owners which they have (kinda) and are currently in debt 20+ billion.
That being said there are many alternatives to the government flood insurance (google search “Lloyds of London flood insurance” or “Private Flood insurance market” and then you will get the real picture of the full spectrum of options available for your flood insurance.
To buy in a high risk flood zone or not that is the question.
I believe that if you are going to go for it –you should at least get the seller to pay for and/or provide you with an elevation certificate (EC). The private flood insurance markets don’t really use them but the NFIP or government option does and sometimes the government option has the best price when you use this EC document.
NOTE: if the property has had a flood before and you still decide to move forward with the purchase of the building make sure you get all the history about the flood claim (including the payout) reason I recommend this to all my clients is because the claim (or flooded) information is protected under the privacy act (WAHA) and if you ever have to dispute the government information about the history of the property you will have a long process of trying to get access to the document you need to dispute with the government. I have worked with many clients to get the history and this is a long and tedious process.
As a resource you can use this link to put in any property and see if it falls into the high risk flood zone or not if it does (your lender will require you to purchase a flood policy) if it is close I suggest you get one anyway because it is just for peace of mind just in case. Any questions. I can help with LET ME KNOW.
HOW TO find IF YOUR PROPERTY IS IN A HIGH RISK FLOOD ZONE
Brax P in Phoenix, Az – Thank you all for the detailed feedback and historic stories! I asked a few neighbors, some of which have lived in the neighborhood for over 50 years, all said they’ve never had issues with flooding, even in Monsoon season the street flows a bit but is heavily supported by storm water drains and never near the homes.
The estimate I got is great, needless to say, the flood insurance is now under budget and fits within my overall insurance budget (after getting a few additional discounts on my home insurance quote 😉 ) Thanks flood nerds!