FLOOD ZONES & FLOOD INSURANCE
Flooding in the Charleston area is caused by hurricanes or high tides, in both cases the flooding recedes with the change to low tides.
Charleston, South Carolina is called the Lowcountry for a reason, much of the land in the area is close to sea level interspersed among rivers, creeks, sounds, harbors, and the Intracoastal waterway... there is a good chance mandatory flood insurance will need to be purchased through FEMA, as required by the Federal Government. This flood insurance coverage is required before you can obtain financing on your home. The federal regulated flood insurance premium required is reasonable.
It must be determined in which flood zone a home is located before a loan is taken on the home. Flood zones are constantly being reevaluated and changed, and the system for categorizing a flood area is intricate. It is confusing to most homeowners what constitutes a "good" flood zone rating.
Flood Insurance coverage is required by law for those people determined to be living in special flood hazard areas. The area’s determined to be in a flood zone are from the prior one hundred years and are a direct response to disasters occurring like melting snows, heavy rains, tropical storms, hurricanes as well as failed drainage systems or dams.
These types of high water occurrences make the property owners more prone and highly susceptible to flooding waters.
Prior to 1968, taxpayers across the country helped to shoulder the burden of providing relief and funding for flood victims in highly prone flood areas.
As these bail outs occurred more and more frequently with the increase of building and living in flood prone areas, the taxpayer began to question this practice of helping. Therefore, the United States Government created a type of self-insurance for people who want to live in these special flood zone areas.
The Federal Emergency Management Agency (FEMA) was created and directed by the United States Congress to oversee this program called the National Flood Insurance Program. This program was designed to mitigate future flood damage claims against the Federal Government, as well as ultimately free up the individual taxpayer from the burden and responsibility of restoring flood victims lives back to as they were before the peril happened.
People who choose to live in a high water special flood hazard area are now required to pay FEMA, the pre-set government regulated premium for their flood insurance coverage. These premiums that FEMA collect for underwriting the flood insurance is then used to offset any future claims needing payment as a result of high flooding waters.
There are now over 20,000 communities in the United States enforcing the flood plain management ordinances. This strong partnership between communities, lenders, and insurance companies now saves the American taxpayer millions of dollars each year in disaster relief money.
The main reason for the program's success is the direct result of NFIP’s strict ordinances and compliance procedures. This very strict government ordinance requires financial institutions which are regulated by the Federal government to perform and prepare what is called a flood determination letter.
If the building or home is determined to be in a special flood hazard area, then the financial institution loaning the money is required to provide documentation to the Federal Government showing all necessary flood insurance premiums have been obtained and paid prior to loan financing. Flood Insurance must also be maintained and in force for the remainder of the loan.
As a result of the strict government guidelines, people choosing to live in flood zones areas are required to pay flood insurance premiums or their mortgage loan will be considered in default. Premiums collected by FEMA will ultimately be used to offset high water damage caused by flooding waters for the people paying flood insurance premiums.
Homes built to FEMA's strict guidelines and located in a flood zone will have a 26% chance of needing the flood insurance coverage sometime the term of their 30 year mortgage.
FEMA Flood Zone
These are the most commonly seen flood zones in the Charleston area:
Moderate Flood Risk
An area inundated by 500-year flooding; an area inundated by 100-year flooding with average depths of less than 1 foot or with drainage areas less than 1 square mile; or an area protected by levees from 100- year flooding.
Area of minimal flood hazard, usually depicted on FIRMs as above the 500-year flood level.
Areas subject to inundation by the 1-percent-annual-chance flood event determined by detailed methods. Base Flood Elevations (BFEs) are shown. Mandatory flood insurance purchase requirements and floodplain management standards apply.
Areas subject to inundation by the 1-percent-annual-chance flood event with additional hazards due to storm-induced velocity wave action. Base Flood Elevations (BFEs) derived from detailed hydraulic analyses are shown. Mandatory flood insurance purchase requirements and floodplain management standards apply.
Flood Zone Definitions
Zone V: SFHAs along coasts subject to inundation by the 100-year flood with the additional hazards associated with storm waves. (Zone VE is used on new and some revised maps in place of Zones V1-30.)
Zone A: SFHAs subject to inundation by the 100-year flood. Because detailed hydraulic analyses have not been performed, no base flood elevations or depths are shown. Mandatory flood insurance purchase requirements apply.
Zones AE and A1-30: SFHAs subject to inundation by the 100-year flood determined in a Flood Insurance Study by detailed methods. Base flood elevations are shown within these zones. Mandatory flood insurance purchase requirements apply. (Zone AE is used on new and some revised maps in place of Zone A1-30.)
Zone AH: SFHAs subject to inundation by the 100-year shallow flooding (usually areas of ponding) where average depths are between one and three feet. Base flood elevations derived from detailed hydraulic analyses are shown in this zone. Mandatory flood insurance purchase requirements apply.
Zone AO: SFHAs subject to inundation by types of 100-year shallow flooding (usually sheet flow on sloping terrain) where average depths are between one and three feet. Average flood depths derived from detailed hydraulic analyses requirements apply.
Zone A99: SFHAs subject to inundation by the 100-year flood which will be protected by a federal flood protection system when construction has reached specified statutory progress toward completion. No base flood elevations or depths are shown . Mandatory flood insurance purchase requirements apply.
Zones B,C, and X: These areas have been identified in the community flood insurance study as areas of moderate or minimal hazard from the principal source of flood in the area. However, buildings in these zones could be flooded by severe, concentrated rainfall coupled with inadequate local drainage systems. Local storm water drainage systems are not normally considered in the community's Flood Insurance Study. The failure of a local drainage system creates areas of high flood risk within these rate zones. Flood insurance is available in participating communities but is not required by regulation in these zones. (Zone X is used on new and some revised maps in place of Zones B and C.)
Zone D: Unstudied areas where flood hazards are undetermined but flooding is possible. No mandatory flood insurance purchase requirements apply, but coverage is available in participating communities.
Here's a lesson on hurricane insurance, by the Three Little Pigs.
Insurance lesson from 'Three Little Pigs'
November 27, 2007 - The Post and Courier
There was a recent directive issued by the South Carolina Department of Insurance requesting all commercial and personal property insurance companies to give premium credits to policy holders for the use of certain "loss mitigation" building construction techniques. This directive was the result of recently enacted legislation by the General Assembly.
The General Assembly and the Department of Insurance heeded the lesson from the third of the Three Little Pigs, who knew the secret to wind loss mitigation — build a house that cannot be destroyed by the sly old fox huffing and puffing to blow it down.
The third little pig built his house using the best construction material and engineering for the times, brick, even though it took longer and cost more. The other two pigs built their houses out of straw and sticks respectively.
The only long-term solution to our hurricane insurance problem is to build and retrofit houses and buildings so that they will withstand hurricanes. The directive by the Department of Insurance is the first step toward recognizing the long-term solution and starting a movement to change the thinking and behavior of everyone concerned with solving the problem.
Developers, contractors, banks, building-code inspectors, architects, engineers and the purchasers of homes and commercial buildings need to adhere to the third little pig's risk management thinking in order to solve the problem.
Insurance companies have to start seriously differentiating between the first little pig and the third little pig's construction techniques and reward quality construction with lower premiums.
Unfortunately, as a nation, we didn't pay much attention to construction techniques related to wind survival until the discovery of two realities, which caused huge increases in premiums over the past years. After hurricane Andrew in Florida there was a determination that construction techniques that could withstand wind had not been used. After Hurricane Katrina there was an understanding that the total insured values on the coast were much larger than expected. Couple the fear of poor construction with a lack of capacity (insurance company capital) to cover total insured values, and you develop a crisis.
Other than the loss-mitigation crediting program recently published by the Department of Insurance, all other rhetoric and initiatives have been focused on who is going to pay for hurricane losses. The debate has been about how claims are going to be distributed among the insurance companies and taxpayers in the form of government-sponsored programs and the South Carolina Wind and Hail Pool. We can debate these matters forever, but the root cause of our problem will not be solved until we listen to the lesson so aptly told to us by the mother of the Three Little Pigs: "Whatever you do, do it the best you can because that's the way to get along in the world."
JAMES H. SUDDETH, MBA, CIC, CRM
First Carolina Risk Management Advisors