Information About the NFIP’s Grandfathering Rule
Flood risks can change over time, altering floodplain boundaries. Changes in the status of dams or levees, surface erosion, land use and development can all change the size and shape of a floodplain. FEMA periodically updates and modernizes the nation’s flood maps. New maps reflect recent changes to floodplains and flood risks, and drive changes in flood insurance requirements for some property owners.
FLOOD MAPS AND FLOOD INSURANCE
Flood maps, also known as Flood Insurance Rate Maps (FIRM), show the high-risk areas where there is at least a one-percent annual chance of flooding. In these areas, also known as Special Flood Hazard Areas, flood insurance is required for mortgages from a federally regulated lender. The maps also show the low- or moderate-risk areas where flood insurance is optional but recommended.
When risk designations change, flood insurance rates will change as well. However, property owners may be able to take advantage of certain cost saving options available through the National Flood Insurance Program (NFIP).
Owners of properties that move from a high-risk zone to a low- or moderate-risk zone may be eligible for reduced insurance rates by converting to a Preferred Risk Policy (PRP). A PRP covers both a structure and its contents, and offers substantial savings. A PRP can be obtained for as little as $112 a year.
There are also ways for owners of some structures moving into high-risk zones to save. Existing policyholders may be able to use the rate charged for the lower-risk zone through a process known as grandfathering.
GRANDFATHERING OFFERS SAVINGS
The NFIP’s grandfathering provision offers savings for structures that were built before a flood map was issued for the community, or that were built in compliance with the flood map in effect at the time of construction. The simplest way to grandfather is to purchase a flood insurance policy before the new map takes effect and maintain coverage without a lapse. If a structure was built in compliance with the requirements in place at the time of construction, the zone and Base Flood Elevation (BFE) that was in effect can be used for rating purposes, if either is affected due to a map change. Sometimes using the new zone can provide a better rate than using the older one, so the property owner should always ask their agent to look at both options.
HOW GRANDFATHERING WORKS
If a policy is obtained before a new map becomes effective, policyholders can retain the rate associated with the previous map’s flood zone and BFE, as long as continuous coverage has been maintained. For structures built after a FIRM was issued, insurance costs will be based on the zone designation and BFE for the map in effect at the time the structure was built (unless the new map offers a lower rate). However, policyholders must submit supporting documentation to their insurer that shows the structure was built to conform to standards on the earlier map. Continuous coverage is not required in this case. If a structure was built before the community’s first FIRM was issued and the policy was not purchased prior to the effective date of a new map, policyholders can still save, but policy costs will be defined by pre-FIRM rates associated with their zone designation on the new map.
MORE INFORMATION IS AVAILABLE
Property owners should be fully aware of their flood risk and the current status of flood maps in their community. They can contact their local floodplain management officials to learn the status of local flood maps, or can obtain a copy of the current map at www.msc.fema.gov. Home and business owners who do not have flood insurance should contact their insurance agent to find out more about obtaining flood insurance or visit the FloodSmart website.