Commercial property owners in Federal Emergency Management Agency (FEMA)-designated high-risk flood zones have no reason to celebrate the bills moving through the United States Senate and House of Representatives to delay flood insurance rate increases. Some believe the legislation is yet another glaring example of the inequities of the National Flood Insurance Program (NFIP), which provides subsidized coverage and is deeply in debt. What appears to be lost in much of the conversation on flood insurance reform is accuracy in procedures used to determine whether or not an actual flood risk is commensurate with the price paid for coverage. If you own, manage or represent commercial property in high-risk flood zones, you have a right to an accurate assessment of the property’s exposure to flooding and flood events. Here are five reasons why commercial property owners should verify their flood zone classification:
1. In some counties and states such as Florida and Texas, more than 70 percent of flood zone designations are inaccurate.
2. Many of FEMA’s redrawn flood maps are based on outdated and inaccurate data.
3. Flood maps depict geographical areas, not individual structures which may have been constructed above the community’s base flood elevation to mitigate flooding.
4. An elevation certificate, a critical document which indicates the height of the lowest floor of a building and is used to determine the flood insurance premium for the property, may have errors or omissions.
5. Unlike residential property owners who are on the verge of a delay in flood insurance rate increases mandated by the Biggert-Waters Flood Insurance Reform Act of 2012, commercial properties with subsidized policies will see no such relief. The phase-out of below-market rate flood insurance for businesses began Oct. 1, 2013 and continues.
To verify the accuracy of your flood zone classification, start with a flood risk evaluation, a comprehensive review that studies the characteristics and data of individual structures. If the evaluation identifies an inaccurate flood zone classification, the structure qualifies for reclassification and may realize significant benefits, including:
- Free flood coverage through a master property insurance program, thus eliminating the need for separate NFIP flood policies.
- The elimination of NFIP policies, which will save money every year and increase the net operating income.
- Capturing increased real estate value in the event of property refinancing or disposition.
For more information or a complimentary flood risk evaluation of commercial property you own, manage or represent, contact us, or simply complete this form.
Image via losminios/Flickr under Creative Commons.