Thursday, February 14, 2013
DOUBLE CHECK YOUR ZONE: Do you really need 'required' flood insurance?

With all the flooding due to overflowing rivers and hurricanes in areas across the nation you may be thinking of buying flood insurance.   This is something you may want to check into and talk over with your insurance agent about flood zones and premium amounts for your home.  

However if you have flood insurance and no longer feel the need to keep it and it was required by your lender.

PROBLEM:  Are you in a flood zone?  Are you sure?  Perhaps you bought a home that required flood insurance, then suddenly a year later (or longer), your mortgage company sends you a letter stating you are no longer in a flood zone and no longer required to have flood insurance.   Most people would call their insurance company to cancel the policy, right?   This is where you may have a problem.  The insurance company will tell you their hands are tied, they cannot cancel it and you will receive no money back from the premium you paid.  Or they may tell you, that you may be lucky and fall into the FEMA Cancellation guidelines.

SOLUTION:  First - double check your information.  Enter your address to access the flood map on the FEMA website:

If the zone was revised during your current policy term (you were in a flood zone and it was re-mapped and you are no longer in a flood zone) - FEMA's cancellation procedures are as follows (per their website):

Years Eligible for Refund: Current year in those cases where the map was revised during the current policy term. If the insured was required to renew the policy during the 6 months before or after the effective date of the revised map, the insured may be eligible for a refund of the prior year’s premium. For example, the flood policy was effective from January 1, 2010, to January 1, 2011, and renewed January 1, 2011, to January 1, 2012. The effective date of the map change is February 15, 2011. The cancellation will be effective January 1, 2010.

If a claim has been paid or is pending during a policy year for which cancellation is requested, the policy cannot be canceled.

••Cancellation Request: Must be received during the policy year or within 6 months of the policy expiration date.

••Required Documentation: Statement from the mortgagee that insurance was required as part of the mortgage but is no longer required, and a copy of the revised map.

Even if you are one of the unlucky homeowners that were told by your mortgage company that you were in a flood zone and required insurance and no longer have to carry flood insurance - Your insurance company has limitations as they must follow the government guidelines. 

The only options you have if you have never been in a flood zone but bought flood insurance are as follows:
  • The flood insurance policy can be changed from a STANDARD Flood Policy (required by mortgage company) to a PREFERRED Flood Policy (slightly lower annual premium and not required by mortgage company).

  • The insured's flood insurance company can go back to NFIP (National Flood Insurance Program) with 6 years of documentation that they will do this once you change the policy to a preferred policy.  This will give you the difference in the annual rate. For example:  if the standard policy cost $505 for the year and the preferred policy cost $395 for the year, they will refund you $110.00 for that year.   They will do this for all 6 years.

  • You may be able to go back to your mortgage company and try to get the money back from them as they told you that flood insurance was needed.   Talk to management and be sure you have all the documentation you need in order to get a proper retroactive refund.

Your flood insurance company will have to submit the paperwork to NFIP (National Flood Insurance Program). 

While this may seem overwhelming, keep these tips in mind:

1)    Don't get frustrated when trying to get a refund. 

2)    Ask questions.   If the customer service representative you are speaking with gives you information you don't understand and they get frustrated ask to speak to a manager so there is no misunderstanding if the customer service representative can't answer to your satisfaction.   You may be talking to someone that has not handled this process before and doesn't have all the answers, or the authority to handle the situation.   This is no one's fault just a fact of life. 

3)    Keep a pad of paper next to you and record the company and person you are talking to.   Jot down notes of what was discussed in addition to the time and date, along with the name and badge number or phone extension of who you spoke with. 

4)    Keep all documentation from mortgage and insurance companies organized and paper clipped together for each and every person you may talk to.  

IF YOU HAVEN’T YET BOUGHT YOUR HOME:  Don't take the mortgage company’s word, double check you are in a flood zone and have your realtor get you the proper paperwork and have them both double check the geography and zones.  Do your own homework on the FEMA website.

This is important to do in order to avoid the above situation.  Once you buy the insurance you are not able to cancel it and get your money back – so DO YOUR HOMEWORK FIRST.  You can only cancel it if you were in a flood zone and that zone changed within a certain period of time, check regulations.     If you are not in a flood zone to begin with and you buy a standard flood policy (mortgage required) these can be changed to a Preferred flood policy (slightly less expensive) but they cannot be canceled only non-renewed.  In other words, you are stuck with this policy for the year or years you have it. 



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