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Flood Insurance - A Topic For Milford CT Waterfront Home Sellers & Buyers
As you prepare to market your Milford CT Waterfront or water view home you are probably remembering the feelings you had when you purchased your house. You most likely accomplished a lifelong dream, taking the American dream one step further to the ultimate in homeownership. You can envision scores of people lining up to buy your home based on the charm alone. While owning a house on the water or in a water area is a dream for many, most buyers are savvy decision makers factoring in many variables in addition to the areas beauty.
In days past buying your dream home in a fantastic location near the water in Milford CT was the prime motivation. What a great decision you made, you got to enjoy a wonderful lifestyle and your property appreciated significantly. That property value appreciation combined with the effects of recent hurricane seasons has changed the way people, insurance companies and banks evaluate properties.
The sales process of any home is a complex and can go either very smoothly or come apart at any point in the process. Making sure you position yourself for success early in the game is critically important. While you may run into a buyer willing to spend over $1,000,000 for a property and not protect against risk, it would be common for a buyer to investigate risk reduction prior to close.
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For water area homes in Milford one of the best things you can do before you market the house is understand the insurance implications and help make the sales process as easy as possible. More and more, buyers of water area properties are placing an insurance contingency in the offer. This is for two reasons: the purchase of water area real estate in Milford or any of the CT Shoreline areas is a significant investment; and any government back mortgage requires protection. Typical homeowners insurance will not cover flood damage, the buyer will need to purchase flood insurance.
There are two key pieces of information that you should know and the buyer will ask for: What is the Flood Risk and what is the elevation of the structure and key aspects of the building. The flood risk can be assessed three ways, one going to town hall, second visit the FEMA website FloodSmart.gov: What's Your Flood Risk?, the third is to ask your Insurance Agent. FloodSmart.gov provides a wealth of information including premium estimates.
To understand how FEMA assesses a particular street visit the FEMA site http://www.fema.gov/hazard/flood/index.shtm click on Flood Maps and then enter your street address, City and State. See definitions below.
High Risk areas are typically required by banks and mortgage companies, and many people in Low and Medium risk areas may also want to have their homes covered by flood insurance since flood damage is not covered by the typical homeowners policy.
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Certificates of Elevation are important in the Milford CT home sale process. While not always required to obtain flood insurance, homes built before your town enrolled in the emergency program now governed by FEMA are exempt from the requirement to provide a Certificate of Elevation. Most towns were enrolled in the program between 1978 and 1980. While not required, the Certificate, can help reduce the cost of insurance because the risk better assessed by the carrier. All structures built after the town’s enrollments do require a certificate. Having a Certificate of Elevation completed prior to placing your house on the market could give you a competitive advantage to the house down the street that does not have one available.
Flood insurance is one very important concern and another is Hurricane Underwriting, there are a number of firms who have stopped this coverage entirely.
Bottom Line – Be prepared; make the home more marketable by understanding the insurance angle and best positioning your home for a smooth sail. Since many buyers want to assess their own risk, they are placing a contingency of “Insurability” on the offer, that is a broad statement that could mean Hurricane Coverage – before you accept a broad statement know what your home could be covered for and narrow the scope of the contingency.
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Flood Insurance Basics
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More than likely in this area of the country you will be asking a buyer to spend in excess of $1,000,000 to purchase a waterfront property and over $500,000 for water area or view properties. The National Flood Insurance Program provides coverage up to $250,000; this is a FEMA backed program. Supplemental insurance in excess of $250,000 may also be purchased
Low to moderate risk areas are eligible for the preferred policy. A $250,000 preferred risk policy includes $100,000 in contents and the premium is $325 per year. There are carriers that will provide additional coverage beyond the $250,000 but each carrier is different in their level of coverage and tolerance for risk.
FEMA Definitions
Definitions of FEMA Flood Zone Designations
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| Flood zones are geographic areas that the FEMA has defined according to varying levels of flood risk. These zones are depicted on a community's Flood Insurance Rate Map (FIRM) or Flood Hazard Boundary Map. Each zone reflects the severity or type of flooding in the area. |
| Moderate to Low Risk Areas |
| In communities that participate in the NFIP, flood insurance is available to all property owners and renters in these zones: |
| ZONE |
DESCRIPTION |
| B, C, and X |
Areas outside the 1-percent annual chance floodplain, areas of 1% annual chance sheet flow flooding where average depths are less than 1 foot, areas of 1% annual chance stream flooding where the contributing drainage area is less than 1 square mile, or areas protected from the 1% annual chance flood by levees. No Base Flood Elevations or depths are shown within this zone. Insurance purchase is not required in these zones. | |
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| High Risk Areas |
| In communities that participate in the NFIP, mandatory flood insurance purchase requirements apply to all of these zones: |
| ZONE |
DESCRIPTION |
| A |
Areas with a 1% annual chance of flooding and a 26% chance of flooding over the life of a 30-year mortgage. Because detailed analyses are not performed for such areas; no depths or base flood elevations are shown within these zones. |
| AE, A1-A30 |
Areas with a 1% annual chance of flooding and a 26% chance of flooding over the life of a 30-year mortgage. In most instances, base flood elevations derived from detailed analyses are shown at selected intervals within these zones. |
| AH |
Areas with a 1% annual chance of shallow flooding, usually in the form of a pond, with an average depth ranging from 1 to 3 feet. These areas have a 26% chance of flooding over the life of a 30-year mortgage. Base flood elevations derived from detailed analyses are shown at selected intervals within these zones. |
| AO |
River or stream flood hazard areas, and areas with a 1% or greater chance of shallow flooding each year, usually in the form of sheet flow, with an average depth ranging from 1 to 3 feet. These areas have a 26% chance of flooding over the life of a 30-year mortgage. Average flood depths derived from detailed analyses are shown within these zones. |
| AR |
Areas with a temporarily increased flood risk due to the building or restoration of a flood control system (such as a levee or a dam). Mandatory flood insurance purchase requirements will apply, but rates will not exceed the rates for unnumbered A zones if the structure is built or restored in compliance with Zone AR floodplain management regulations. |
| A99 |
Areas with a 1% annual chance of flooding that will be protected by a Federal flood control system where construction has reached specified legal requirements. No depths or base flood elevations are shown within these zones. | |
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| High Risk - Coastal Areas |
| In communities that participate in the NFIP, mandatory flood insurance purchase requirements apply to all of these zones: |
| ZONE |
DESCRIPTION |
| V |
Coastal areas with a 1% or greater chance of flooding and an additional hazard associated with storm waves. These areas have a 26% chance of flooding over the life of a 30-year mortgage. No base flood elevations are shown within these zones. |
| VE, V1 - 30 |
Coastal areas with a 1% or greater chance of flooding and an additional hazard associated with storm waves. These areas have a 26% chance of flooding over the life of a 30-year mortgage. Base flood elevations derived from detailed analyses are shown at selected intervals within these zones. | |
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| Undetermined Risk Areas |
| ZONE |
DESCRIPTION |
| D |
Areas with possible but undetermined flood hazards. No flood hazard analysis has been conducted. Flood insurance rates are commensurate with the uncertainty of the flood risk. | |
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