Flood Insurance Issues for Home Buyers/Sellers

Real Estate Agent with Sun Realty NC

Is the property in a Special Flood Hazard Area (SFHA)? 

Lenders require property owners within a SFHA zone to carry flood insurance

If there is no mortgage on a property, the owner may not be aware of the SFHA zone status of the property. Knowing a property’s SHFA status and flood insurance requirements upfront is important to avoid surprises that could bring a sales negotiation to a grinding halt.

Sellers can assign an existing flood insurance policy to a new buyer.  

If your current flood zone is being grandfathered, the buyer is able to take advantage of that as well. This can make flood insurance more affordable compared to buying a new policy.

If the SFHA zone has changed due to a redrawing of maps, NFIP will not change the flood zone if there has been continuous coverage.  Depending on the bank, sometimes they will not recognize this and force the policy rating to be changed. Requests to assign a flood policy to a new buyer must be signed and submitted prior to the closing date.  Refunds are not issued from the flood carrier.  You can calculate what the estimated refund would be and handle it at closing. If you are selling your home and believe map changes coming soon, it may be beneficial to buy a flood policy now and lock in at the preferred risk zone.

Elevation Certificates are usually prepared by a land surveyor or engineer hired by the property owner or potential property owner.  It determines the relation between the house and the base flood elevation (BFE).

‘Post-FIRM’ construction’ is when a home was first built or substantially improved AFTER the community joined the regular flood program.  ‘Pre-FIRM’ is construction before  a community joined the flood program and their first FIRMs became effective. If a property is in an X zone, an elevation certificate is not required regardless of Pre-FIRM or Post-FIRM status . Even if not required, an elevation certificate can help to reduce insurance cost.  The rate with elevation data may be less than the published rate. Flood Zones can be obtained from Community Officials or Insurance Agents.  

Elevation Certificates are required to purchase flood insurance when a property is in a SFHA zone and has Post-FIRM construction.  

Homeowner Flood Insurance Affordability Act of 2014 (HFIAA) slowed the elimination of flood insurance subsidies for properties in high-risk zones.  To compensate for the decrease in revenue, the new law calls for the addition of a surcharge on all policies that will be collected until, with limited exceptions, all subsidies are eliminated. The surcharge is a flat fee applied to all policies based on occupancy type of building  and is not associated with the flood zone or construction date (pre-FIRM/post-FIRM).

Annual Policy Surcharge - $25 or $250 

  • Policies for owner-occupied, single family detached buildings and individual condo units that are the primary residence of the policyholder along with tenant contents-only policies include a $25 surcharge.
  • All other buildings include a $250 surcharge
  • Verification of Primary Residence Status form must be completed to receive the lower surcharge

NOTE: This information is only a general description of flood insurance issues. Every situation is different and coverage varies based on the property and situation. Coverage may be subject to individual insureds meeting underwriting qualifications and to availability. For further information visit www.floodsmart.gov or contact an insurance agency associate.


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Got questions?
hughwilley@sunrealtync.com or 252-489-8491
Hugh "Scooter" Willey


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