Should I cancel my flood insurance policy? Part 1: Conversations with Property Owners.

Property owners cancel their flood insurance policies for a lot of reasons.  It can be an expensive policy to carry, so we understand.  At MassiveCert we are in the business of helping homeowners untangle the requirements and regulations to get the flood certification you need as easily as possible.  We are on your side.

Here are some of the conversations we’ve had with concerned property owners like yourself that are thinking about dropping their flood insurance policies.

“It hasn’t flooded here in 100 years.”  You just can’t predict Mother Nature.  An extra inch of rain here or there, or more construction or a clogged culvert can create different water flow patterns and cause your dry basement to be a swimming pool.  Things are always changing, so whatever happened in the past doesn’t mean that’s what’s going to happen in the future.  See our blog about the 100-year floodplain.

“I paid off the house so I’m not required to carry the policy anymore.”  First, congratulations on paying off a mortgage!  And it’s true that you can likely drop the policy now.  But that doesn’t mean you aren’t in a floodplain.  Your risk hasn’t changed, just the federal flood insurance mandate has been removed.  So it’s your choice, but the property is still probably in a floodplain so you should consider your plan for protecting your now wholly-owned asset.

“My bank says I don’t have to get flood insurance but my neighbor does.”  If your neighbor can flood, so can you because the scientists and engineers can’t predict where the flood water is going to go with that much detail.  They can get close most of the time, but not 100% right all the time.  If you are close to the 100-year floodplain but technically not in it, you should talk to your agent about a Preferred Risk Policy which is much cheaper but keeps your property covered.

“The government just hands out bail-outs so they’ll give me the money to fix the house.”  It doesn’t work that way.  At least not for floods.  You are on the hook for your mortgage to the bank no matter what happens.  FEMA often gives post-disaster low interest loans from the Small Business Administration to re-build, but it’s a loan.  Now you’ve got a loan and a mortgage.  You can possibly get some disaster relief grants from the feds, but your house isn’t being rebuilt without another loan.

“The bank isn’t going to know if I cancel my policy after I close my loan.”  Some people do get away with this.  For a while anyway.  But the law has changed.  The Biggert-Waters Flood Insurance Reform Act of 2012 and the Homeowner Flood Insurance Affordability Act of 2014 substantially increased the fines to banks for letting things like this happen.  So the heat is on to stop policy drops and you could find yourself paying a “force-placed” flood insurance policy at a much higher price.

“I have a Letter of Map Amendment from FEMA so I don’t have to pay flood insurance.”  MassiveCert is simply the best at helping property owners get a Letter of Map Amendment (LOMA) from FEMA.  This allows you to stop paying the mandatory federal flood insurance.  But, when you get a LOMA you are still very close to the 100-year floodplain so your risk has not really changed.  A few sticks and leaves in a culvert could block the flood water and send it to your basement.  The difference between being in the floodplain or not can be just one tenth of one foot, which is just 1.2 inches.  That’s smaller than the mound of mulch around your bushes.  So, if you get a LOMA please talk to your agent about getting a Preferred Risk Policy from FEMA which has the same coverage but can be very cheap.  Let them at least give you a quote for the new policy so you have all the information and then decide for yourself what you want to do.

“Half the maps are wrong anyway.”  It’s true that errors are found on the maps all the time.  Usually it’s because the map in question is very old and doesn’t reflect the recent things that have happened in the community.  If your map is wrong, you should take it up with your community leadership and FEMA so they are aware and make fixing that map a priority.  Also, see if MassiveCert can help because sometimes an Elevation Certificate or a Letter of Map Amendment is the correction to a bad map.

“The flood insurance rates are too expensive and they keep going up so I have to drop the policy.”  This is true for a lot of homeowners.  Recent federal legislation is rapidly increasing flood insurance rates, and in some cases, it’s very expensive.  If this is your case, we encourage you to talk to your political representatives and community leaders about it.  Also, there are private flood insurance policies available that are not issued through the federal government, so see if those work for you.  And see if MassiveCert can help lower rates with an accurate elevation certificate or a Letter of Map Amendment.

I hope this information helps someone.  By no means do we want to tell anyone what to do because these are your choices for your property.  We are on your side and we’re here to help you get what you need to support your own decisions.  If there’s a way you think we can help you, please drop us a line.

Stay safe.