By Ron Hurtibise
Borrowers with federally backed mortgages in parts of South Florida, and soon all Citizens customers, must buy flood insurance.
MIAMI – Tens of thousands of homeowners in Florida will soon be required to buy flood insurance, and the flooding that inundated large areas of Broward and Miami-Dade counties this week shows why insurance experts say it’s necessary.
In Broward County, 88,913 parcels that were previously in low-risk flood zones on flood hazard maps updated by the Federal Emergency Management Agency’s National Flood Insurance Program will be moved into special flood hazard zones, according to a new flood map revision that takes effect July 31.
Home loan borrowers with federally backed mortgages who live in those parcels will now be required, under terms of their loans, to purchase flood insurance.
Clara Inchastegui, who lives in Miramar’s Sunset Lakes community, said she was notified that she will be required to buy flood insurance once the new map takes effect.
“I’m not happy about it,” Inchastegui said. “Now we’re going to have to pay for flood insurance and before we didn’t.”
A majority of parcels newly designated as high-risk are in low-lying areas of eastern and southern Broward that were swamped by the heavy rainstorms of the past week.
And if you get your homeowner insurance from state-owned Citizens Property Insurance Corp., you are being required to purchase flood insurance if you want to keep your Citizens policy. That law, enacted in 2022 just months after Hurricane Ian swept the state with a deadly mix of high winds, rain and storm surge, is being phased in through 2027.
While it will ultimately require that nearly all Citizens customers buy flood insurance whether or not they live in flood-hazard zones, the new law took effect on July 1, 2023, for all Citizens properties with wind coverage in special flood hazard zones.
After every flood disaster, policymakers say they are surprised by the number of victims who said they thought their damage was covered by their homeowner insurance policies.
It’s not. Homeowner insurance typically only covers water damage if it is driven by wind or results from a breach of the roof or walls, a pipe break or failure of an indoor appliance such as a dishwasher or hot water heater.
Flooding that results from intense rain, as South Florida homeowners experienced this past week, rising lakes or canals, or storm surge during a hurricane is only covered by flood insurance.
“What we experienced this week is a stark reminder that flooding can occur any time in South Florida, not just during hurricanes,” said Mark Friedlander, director of corporate communications for the industry-funded Insurance Information Institute.
“And flooding is not restricted to FEMA flood zones. It can occur in any community. Homeowners need to own their risk and assess how vulnerable they are to hazards like flooding. You are not fully protected from storm hazards without flood insurance.”
Florida already has the highest number of properties with flood insurance from the National Flood Insurance Program of any state — 1.7 million of 3.4 million nationwide. Of the 1.7 million, 666,513 policies were taken out in South Florida’s tricounty region, FEMA figures show.
In addition, the statewide number of flood insurance policies from private-market insurers was 76,348 as of Dec. 31, according to the Florida Office of Insurance Regulation.
But the combined total still means that only about 19% of more than 10 million Florida households have flood insurance.
The shortfall exposed thousands of Hurricane Ian victims to flood damage not covered by insurance. Data analytics company CoreLogic found that Hurricane Ian caused $18 billion in uninsured flood damage in Florida and other impacted states like North and South Carolina.
In Florida, more than 70,000 Hurricane Ian victims received FEMA disaster assistance grants that averaged $9,242 and could be used for rent for temporary shelters or basic home repairs. They could also apply for low-interest Small Business Administration loans that are required to be repaid.
Ian victims with flood insurance, by contrast, received an average of $66,000 when they filed claims, FEMA figures show.
How are properties rated for flood risk?
FEMA periodically revises its flood insurance risk maps on a county-by-county basis after conducting risk studies that consider changes, such as updated hurricane modeling, updated elevation data, development that’s taken place since the last study, and recent storm patterns.
It assigns risk zone ratings that correspond to the likelihood that a structure will be flooded. Zones that begin with the letter A, such as AE or AH are at high risk of flooding. Homes and businesses with federally backed mortgages and Zone A designations are required to purchase flood insurance.
The same is true for properties in zones that begin with V, like V or VE. These denote high-risk coastal areas with additional hazards from storm waves.
Parcels in X zones are determined to be of low and moderate-low risk of flooding and therefore carry no flooding insurance requirement.
But experts caution homeowners in X zones against foregoing flood insurance, particularly in Florida, where the entire state is under a perpetual flood risk.
Nationwide, about a third of all flood insurance claims are filed by owners of properties in moderate-low risk zones, according to FEMA’s website.
Map revisions will prove expensive for some
Broward County’s upcoming flood risk map revision is the first in South Florida slated to be finalized.
Palm Beach County is expecting a letter from FEMA before the end of June that would finalize a revised flood risk map that followed FEMA’s study of new coastal engineering in the county.
The revision would add 5,804 structures to special flood hazard zones, a FEMA spokesman said.
Miami-Dade County is awaiting a letter in August resolving appeals by several cities to a pending map revision that proposes to add 45,420 structures to special flood hazard zones.
Of the 88,913 Broward County parcels that will be added on July 31 to special hazard flood zones where flood insurance will be required for borrowers of federally backed mortgages, 79,689 were in such zones prior to being removed during the last map revision in 2014.
A total of 266,000 — or 60% of all Broward parcels — were moved into low or moderate risk zones in 2014. The map taking effect on July 31 moves only 2,559 parcels from zones requiring flood insurance.
Flood insurance will remain mandatory for 149,795 parcels and optional for 242,654 parcels.
Newly placed into flood zones on July 31 will be:
— 25,878 parcels in Miramar.
— 22,079 in Pembroke Pines.
— 9,455 in Fort Lauderdale.
— 7,392 in Hollywood.
— 5,910 in Oakland Park.
— 3,557 in Pompano Beach.
— 3,082 in Cooper City.
— 3,055 in Dania Beach.
— 1,934 in Davie.
— The rest are split among 11 other cities and unincorporated areas of the county.
Lending guidelines for homeowners with federally backed mortgages require purchase of flood insurance by borrowers in special hazard flood zones.
Dulce Suarez-Resnick, vice president at Miami-based insurance agency Acentria, said mortgage lenders will begin sending letters after July 1 to homeowners formerly in the lowest-risk “X” zones who are being transferred to higher-risk zones such as “AH” or “AE.”
Borrowers who receive a letter will have 30 days to provide proof of flood insurance coverage. Borrowers who fail to do so will put themselves at risk that their lender will force-place coverage, Suarez-Resnick said.
A Miramar resident, Suarez-Resnick said she is among homeowners who were transferred out of a high-risk zone into an “X” zone in 2014 and is being returned to a high-risk zone on July 31.
“We will get a nasty gram (from her lender) in July,” she said.
Inchastegui’s agent told her the coverage that she’ll be required to buy will cost between $700 and $900. She acknowledged that’s less than others will have to pay but said it’s yet another new expense to deal with as costs rise for regular property insurance, food and utilities.
“I guess in the event there’s a disaster, of course we would need it,” she said. “But we’ve been here 14 years and never had a flood problem.”
Coverage became more expensive on Oct. 1, 2021, after FEMA introduced a new pricing structure it calls Risk Rating 2.0.
Under the new structure, prices are set based on risk variables such as elevation of the structure, proximity to water sources, flood frequency, types of flooding, and cost to rebuild.
‘A rude awakening’ awaits those whose policies lapsed
While existing policyholders will be grandfathered into new higher prices with increases capped at 18% a year, customers buying flood insurance for the first time — or for the first time after allowing coverage to lapse — will be required to pay the current full price before the 18% annual cap takes effect.
“Those folks that let go of their flood policies back then are in for a rude awakening,” Suarez-Resnick said. “They lost the grandfathering, and they lost the protection of the new Risk Rating 2.0 glide path, where the rate increases are capped at 18% until they reach the full risk rate.”
A spreadsheet released by FEMA in 2023 showed that coverage in Broward County’s 33305 ZIP code that includes Wilton Manors and Fort Lauderdale neighborhoods near the Middle River increased by 209% — from an average of $1,099 to $3,400.
In the 33315 ZIP code that includes Fort Lauderdale’s Edgewood neighborhood, average rates increased by 64% — from $863 to $1,420.
Cost burdens will also be increased by the new mandate that Citizens Insurance customers with wind coverage must buy flood insurance. Currently, the requirement would affect about 1.1 million Citizens customers relying on the company to provide personal residential coverage. About 100,000 households with renter or condo unit coverage will be excluded.
The requirement took effect on July 1, 2023, for Citizens customers in flood hazard zones seeking to renew their policies.
On Jan. 1, it took effect for all policies with wind coverage of $600,000 or more.
Next Jan. 1, it will take effect for all policies with wind coverage of $500,000 or more, and on Jan. 1, 2026, for policies with $400,000 or more in coverage.
By Jan. 1, 2027, all Citizens customers with wind coverage, except renters and condo unit owners, will be required to buy flood insurance.
However, customers targeted by “takeout” companies as part of Citizens’ controversial depopulation strategy will be exempt if they had not yet purchased flood insurance prior to accepting the takeout, Citizens spokesman Michael Peltier said.
Since Citizens began enforcing the flood insurance requirement, 23,402 policies have been terminated or non-renewed for failing to purchase flood coverage, Peltier said.
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