Grandfathering

grandfathering

How to save money with the Grandfather Rule.

If your property changes from low-risk to high-risk, you will likely be required to protect your building and its contents with flood insurance if you have a mortgage. Flood insurance rates for high-risk areas are higher, but there are ways to save money beyond the PRP Eligibility Extension with the NFIP Grandfather Rule.

You can take advantage of grandfathering by buying a policy before the new maps (known as Flood Insurance Rate Maps or FIRMs) take effect. Homes and businesses may qualify for the low-cost Preferred Risk Policy, with premiums starting as low as $129 for a home and its contents and $643 for a commercial building and its contents.* After the new maps become effective, you can now renew the PRP for two years. On the third renewal, you will qualify for the standard rates associated with moderate-to-low risk zones, rather than high-risk zones. This could add up to significant savings because otherwise, the property will be rated using the high-risk flood zone on the new map.
*$129 residential annual premium provides $20,000 building and $8,000 contents coverage. $643 commercial annual premium provides $50,000 building and $50,000 contents coverage.

For older structures built before the community’s first flood map was issued (known as pre-FIRM buildings), this is the only grandfathering option when they are mapped into a high-risk area. Structures built after the community’s first flood map was issued (post-FIRM) have two opportunities to lock in the flood zone (or Base Flood Elevation, BFE):

  1. You can purchase a policy before the new maps take effect1, or
  2. You can use the grandfather rule if you have proof that your home was built in compliance with the flood map that was in effect at the time of construction-your insurance agent can help produce the necessary documentation.

Note that in some cases, the new flood map may actually result in a lower premium than what grandfathering applies. So have your insurance agent check all options.

1 For buildings newly mapped into a high-risk area, a policy must be in effect before the 2-year PRP eligibility extension period ends.

Understand which insurance policy you should purchase during a map change.

IF YOUR HOME OR BUSINESS IS CURRENTLY IN A MODERATE-TO-LOW RISK ZONE… DO THIS BEFORE THE NEW MAPS GO INTO EFFECT DO THIS ONCE THE NEW MAPS BECOME EFFECTIVE
Has a mortgage and is not protected by flood insurance… Purchase a Preferred Risk Policy now and be eligible for “grandfathering.” Keep coverage in force and you will be “grandfathered in,” avoiding high-risk rates.*
Does (not) have a mortgage but is protected by flood insurance… Renew your policy. You can save by having a policy in force. Continue to renew your policy and you will be “grandfathered in,” avoiding high-risk rates.*
Does not have a mortgage and is not protected by flood insurance… Purchase a Preferred Risk Policy now and be eligible for “grandfathering.” Continue to renew your policy and you’ll stay eligible for the standard rate, based on your earlier flood zone, and avoid high-risk rates.
Is leased or rented… Protect the contents of your home or business by purchasing Preferred Risk contents coverage. Talk with your insurance agent about other insurance options that may be available.

*Note that sometimes using the new maps will result in lower premiums than the grandfathered rates; have your agent check both options.

 

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