Protecting your community: What board members need to know about flood insurance in Florida

As extreme rain events and unpredictable weather patterns have become more frequent, a growing number of communities are facing the threat of flooding. According to the National Oceanic and Atmospheric Administration (NOAA), floods in the United States kill more people each year than tornadoes, hurricanes, or lightning. 

As a board member, you care about your community’s preparedness, especially if the property is located in a flood-prone area. Investing in flood insurance in Florida is one of the best ways to protect your community and its assets.

Read on to learn what you need to know about floods and how flood insurance can help mitigate expenses caused by a flood.

What is flood insurance and is it required?

Flooding is caused by many reasons, including storm surges, overflowing rivers, or heavy rainfall. Damage caused by flooding can be devastating and costly to repair. Flood insurance protects your community from the potentially high cost of flood-related damages by providing financial protection and compensation to recover from losses not covered by standard homeowners' or property insurance policies. 

In Florida, condo associations must purchase flood insurance if the property is in a high-risk flood area. (Note: The Federal Emergency Management Agency (FEMA) considers any location with a 1% or greater chance of experiencing a flood each year high risk.) Flood insurance is also required if a property’s mortgage is held by a government-backed lender such as Fannie Mae or Freddie Mac. 

Know your community’s flood risk

Flood risk refers to the potential for a flood and the subsequent likelihood and severity of damage it may cause. 

“Everyone lives in an area with some flood risk, whether low, medium or high; your community’s risk depends on various factors such as its geographical location, historical data, rainfall patterns and more,” said John Lee, vice president of FirstService Financial.  “Talk to your agent and management partner about mitigation opportunities that will better protect your property and potentially save you on your premiums.”

Flood maps are popular tools for determining which areas are at risk of flooding, allowing communities to develop strategies for reducing their risk. Because flood risk changes over time, FEMA regularly works continuously to identify and map community flood risk. Understanding your community’s flood risk is crucial to protecting lives and property values. 

A property management team with experience and knowledge of your area can help your board assess your community’s vulnerabilities, sharing insight into ways to mitigate risk.

Flood damage vs. water damage: what's the difference?

Water and flood damage may sound similar, but they are quite different. Simply put, the main difference between flood and water damage is the water's origin. Flood damage is caused by natural disasters such as hurricanes, storms or overflowing rivers. On the other hand, water damage is caused by internal issues within the residence, such as a burst pipe or a leaking appliance. It’s important to understand the difference as insurance policies often treat water damage and flood damage differently, and you want to ensure your property is adequately covered.

FEMA or private insurance?

“Most condo and community associations purchase flood insurance through FEMA’s National Flood Insurance Program (NFIP), as its rates are typically more competitive than private insurers,” according to Pamela Malfavon, director of financial products and services for FirstService Financial. The NFIP offers insurance to all properties that comply with minimum standards for floodplain management – a community-based effort to prevent or reduce flooding risk – though there are coverage limits. Supplemental private flood insurance is an option if additional coverage is needed.

What does a condo association’s master policy cover?

A condo association's master insurance policy covers the community's common areas and the building's structure. Master insurance policies also cover a unit owner's contents but only up to a certain amount. Most condo unit owners are responsible for paint, wallpaper, ceiling fans, light fixtures, kitchen and bathroom flooring. Work with your insurance broker and review your association's policy to understand the extent of coverage provided for your property. 

Learn more about condo and community property insurance by watching the Board Brief: Association Insurance 

The cost of flood insurance is rising

Flood insurance premiums are expected to soar in Florida. According to FEMA's projections, some areas' premiums are expected to even double. Boards should know that premiums will continue to rise in Florida for properties in high-risk flood areas under FEMA's updated pricing methodology. Instead of relying on old flood zone maps covering broad areas, the new methodology bases premium prices on a more comprehensive range of factors. Implemented in April 2023, Risk Rating 2.0 allows insurance agents to consider multiple flood risk factors when providing customized quotes. Under the previous methodology, some policyholders with lower-valued homes may have paid more than their share of the risk, while those with higher-valued homes may have paid less. The goal of Rating Risk 2.0 is to build a more accurate picture of a property's risk to determine its specific coverage needs.

Variables considered under Risk Rating 2.0 include a property's distance to flooding sources, ground elevation, the property's characteristics (building height, foundation type, building occupancy, number of floors, etc.), the property's replacement cost value, and more.

Insurance premium increases under the updated rating system are capped at 18% per year, increasing only until the full risk rate has been reached. 

For more on the rising costs of insurance watch, Ask the Experts: Rising Costs in Community Association Insurance

 

Tips to mitigate flood damage

While you can’t always stop a flood from happening, you can take steps to mitigate some physical and financial loss. Here are some preventive steps to help you protect your property:

• Apply sealants and coatings to your foundation, walls, windows, and doorways to prevent floodwater from entering. 

• In the event that rising floodwater is close to reaching your electrical system, turn off your electricity at the breaker panel.

• Remove water as quickly as possible with a wet/dry vacuum.

• Clear out gutters and drains so that water can flow freely.

• Use sandbags to block any gaps that lead to flooding. If filled and placed correctly, sandbags can divert moving water around buildings instead of through them.

As a board member, being proactive in safeguarding your community against flooding threats is crucial. By investing in flood insurance, you can protect your association from financial devastation.

To learn more about flood insurance, contact FirstService Residential.