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):
- You can purchase a policy before the new maps take effect1, or
- 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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