Flood Insurance and Historic Buildings

By Special Contributor posted 09-24-2015 10:00


By Joslyn Hayes

Preservationists around the country are taking steps to document, protect, and mitigate the effects of climate change on cultural resources. In the summer issue of the Forum Journal, titled “High Water and High Stakes: Cultural Resources and Climate Change,” contributors examined what changing weather patterns mean for cultural resources, what communities are doing to prepare, and how  rising sea levels are already affecting communities. The PLF blog will continue to cover these issues: this week Joslyn Hayes from the National Trust Insurance Services takes a look at changes to the National Flood Insurance Program. Previous posts can be found here.

Screencap of the official site of the National Flood Insurance Program.
Screencap of the floodsmart.gov website | Credit: Floodsmart.gov

It’s important to understand that in the past five years, all 50 states have experienced floods or flash flooding. Many people think they do not have to worry about flooding, but this mentality is what makes the most recent Forum Journal on sea level rise all that much more important. Everyone lives in a flood zone, some are just at a higher risk than others. With rising sea levels and climate change, as these articles point out, the amount of importance that needs to be placed on securing the proper coverage for your historic property is greater than ever. These changes in sea level and climate are permanent, and the ever occurring natural disasters make it hard to reduce your risk, but that’s what insurance is for. If maintained properly, it lessens the severity of a potential loss.

New changes to the National Flood Insurance Program (NFIP) went into effect on April 1, 2015. These changes happened because the NFIP is currently $28 billion in debt. The changes consist of increased premiums, surcharges and fees to policyholders. Simply put, the NFIP needs to raise reserve funds. For decades, the NFIP made flood insurance available at subsidized rates that did not reflect the true risk of flooding. After the recent major storms, funds have been depleted, and it’s now time to budget for future storms, which are bound to happen. The changes to the program affect everyone, including owners of historic properties and in historic districts. Since no area is immune to the increased disasters, and it is important to maintain the proper insurance coverage to lessen the blow of a major storm, costs have gone up.

A few things to keep in mind regarding the changes to the program:

  • For new and renewing policies, there is a $25 surcharge for primary homeowners and a $250 surcharge for non-primary homeowners. A non-primary residence is defined as living at the property for less than 50 percent of the time.
  • All premiums are going up: Depending on the property’s size and location, annual premiums could spike, and with added fees and surcharges, policyholders are looking at an annual increase of around 10 percent over the next five years. Premiums cannot increase more than 18 percent a year for primary residence policies and 25 percent for secondary residences or properties. Ultimately, rates in all flood zones are going up, and to confirm, everyone lives in a flood zone, some are just higher hazard than others.
  • Flood maps are changing: If you purchase a policy before a new map’s effective date, you can lock in a rate at the previous zone level. This will not prevent rate increases, but it may slow the rate at which the increases happen.
  • Higher deductibles are available: The residential deductible limit is now $10,000. A higher deductible helps to lower the premium, but limits do have to be pre-approved by banks. With a $10,000 limit, flood insurance becomes a catastrophic insurance policy.
  • Grandfathered rates will be phased out in 2016.

The changes are putting more responsibility on the policyholder. Lapses in policies could result in properties being subject to a full risk rating and a substantial premium increase. Policyholders may also be required to obtain a costly property elevation survey to justify their location. This would determine if your property is placed in the correct flood zone and also allows your insurance agent to rate you accurately.

Historic properties are exceptional and many are one of a kind, so they won’t benefit from having a one-size-fits-all solution when it comes to coverage. National Trust Insurance Services (NTIS) prides itself in being the insurance resource for historic property owners and preservation organizations. Created in 2003 to address the growing issues and concerns regarding proper insurance coverage for historic properties and the organizations that work to maintain them, NTIS continues to offer insurance expertise in the preservation community. It offers coverage options that exceed the NFIP’s standard limits, and it can provide recommendations on the right coverages for your property as it relates to flood zones and current coverages.

With the changes in the NFIP and the increased costs, it is important to know what you are paying for. Like the journal article on the NFIP suggests, there are certain special considerations in place for historic properties, as long as historic designations are met and maintained. It is extremely important to check with your state preservation office to meet the requirements without losing your designations. As a historic property owner, you understand the connection between preserving the past while looking to what lies ahead. This means a little more research and work is needed to not only preserve your property, but also protect it properly for the future. The summer Forum Journal suggests a number of resources that can help you get started. If you would like to discuss your current insurance coverages with someone in our office, email us at info@nationaltrust-insurance.org or call 866.269.0944.

Additional Resources

Joslyn Hayes is the marketing manager for the National Trust Insurance Services LLC.

#ClimateChange #ForumJournal #Flood #Planning #Sustainability #ForumBenefit

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