The easy answer is: If you are in a flood zone and have a mortgage your lender will insist on it. But, how do they know you’re in the flood zone? Better question yet, are you really in it?
When I initially started writing about this I thought this won’t apply to any of my readers. Turns out there are actually 5.3 homes in the US with flood coverage. Who knew?
Approximately $14,000.00 is what we’ve paid over the last 8 years for FEMA flood insurance. We were the unlucky ones that had their property redrawn into the flood zone map. This happened after the terrible floods that hit Wisconsin back in 2007.
Flood insurance started at $1,296.00 in 2008 and as of September this year it was up to $2,521.00. Somehow this goes a bit beyond the normal inflation.
We’ve lived in the property for close to 8 years now and every year we pay our flood 
insurance. Not because we want, not because we seem to get any benefit from it but because our mortgage company insists on it. We are in the 100 year flood zone after all. If you have a mortgage and live in a flood zone, flood insurance is not voluntary. Mortgage companies want to protect their assets and will make you pay for it.
Funny thing started happening over the last couple of years. Every year the bill would come (actually my monthly escrow would get disbursed) and every year I would go to the FEMA website and look at the maps. There it was: our property still in the flood zone, but… The neighbor across the canal no longer was. Same thing the year after, our property in the flood zone but another neighbor’s no longer was. What was this magic that was elevating my neighbor’s land? Nothing magical about it; year after year neighbors started questioning the flood maps, hiring engineers and getting their elevation re-evaluated. The times this was done it was determined their properties were no longer (never were) in the zone.
So this year I finally came to my senses and hired my own engineer. It’s not cheap at a little over $500 but if it worked out I stood a chance for lots of savings. Low and behold, it was a close call but the numbers didn’t lie. We were not in the flood zone. Remember how I said earlier, the flood zones were redrawn. Redrawn is the key word here. FEMA didn’t come to our property and measured. They redrew the maps and with a broad stroke at that.
Fema recognized this and sent the oh-so coveted letter of release: the LOMA Determination document (removal). I sent that letter to the Mortgage Company which in turn approved the removal from the zone and now I’ve contacted the insurance company to cancel the flood-insurance. Of course I hope to recoup most of the $2,521,00 premium I paid only 3 weeks ago.
What should you take away from this story? If you are one of the 5.3 million flood insurance policy holders, certainly go to the Fema website and check your flood zone maps. If you see your neighbors getting out, consider hiring an engineer. If your engineer finds your property is NOT in the flood zone he/she will submit what is called an eLOMA. FEMA in turn will either approve or deny it. If the FEMA does approve they will provide you with letter of removal. In turn you can submit this to your mortgage company and if they approve (they are not obligated to) you can cancel your flood insurance.
Flood zones however aren’t the only things set by federal or local government. You home price is estimated every year based on broad algorithms that might not apply for your situation. Look into what it is your government is charging you for, and if you feel there is something off about it, question it.
For now I’m going to look forward to my refund and my lowered monthly escrow payments (by almost $200.00 a month). That is until global warming ups the water plain and I land back into the flood zone. Now the exact elevation numbers of our property are known, any true rise in water levels might put us under again. That time around it will be harder to dispute.
Boy to think about the money I could have saved had I hired an engineer 8 years ago 🙁
Good luck reaching your financial goals.
feature photo source
flood photo source
I think flood insurance is only necessary if you live in a flood zone. I lived in a few areas like that and it was really helpful whenever we had a leak in the house. We never had to worry about paying all out of pocket. That would have been a lot of money if we didn’t have that insurance to cover us.
If you had a really nicely finished basement I can see how flood insurance would be helpful. However, I also believe insurance should be there for those calamities you cannot afford. I have health insurance because I can’t afford the $250,000 heart transplant, I have life insurance because we can’t afford life if one of us comes to pass, I have liability because I can’t afford whatever can come your way on that front. With the FEMA flood insurance mandated by the mortgage company you’re not given the choice though. I CAN afford to fix/replace my basement. I have paid over $15,000 in premiums over the last 8 years. Probably more than it would ever cost to repair flood damage and I could have put that up myself at any of that time, in case of flood. Instead I paid that in premium. After 8 years I’m $15,000 lighter with nothing to show for it. More importantly not because I chose to but because I was told to.
Who knows, I might be proven wrong and 2016 brings the 1000 year mother of all floods that breaks it all and I might say: Dang, I wish I still had that FEMA flood insurance. For now I’m going to enjoy the $210 lighter escrow payments each month.
You may want to ask your insurance company about what your new rate would be with the elevation certificate. It may be much lower since they know exactly how much risk the property has now. I’m not sure how far “out” of the flood zone you are now, but it may not be enough to get by unscathed by a large flood. You’ll be up the creek without a paddle at that point. Premiums would pale in comparison to repair costs out of your own pocket.
Yes, just because you can drop the insurance doesn’t mean you should. In our case we already paid over $15,000 in premium. Not in our basement warrants such an investment. If you however have a tricked out basement with expensive stuff you should think twice