Who really needs flood insurance?


The question Mark Lujan is most frequently asked by homeowners in New Mexico is: We live in the desert. Why on earth do we need flood insurance?

Lujan is regional manager for the National Flood Insurance Program, covering Arkansas, Louisiana, New Mexico, Oklahoma and Texas. In his 12 years as an insurance specialist, he said, he’s seen flood damage where no one would ever have expected it.

“Actually, there’s a greater risk over the life of a 30-year mortgage of flooding than fire,” Lujan said.

In the arid Southwest and after the Los Alamos and Wallow fires last year, that seems like a hard sell. And in a state where environmentalists and agricultural producers are pitted against each other over limited water resources — and both are pitted against water prospectors staking claims to entire underground basins — the concept of too much water may be difficult to grasp.

Two years ago, only about 10 percent of Socorro’s homeowners had to have flood insurance, based on their elevation and proximity to the Rio Grande. The rest of the city was designated “Zone X” or “Shaded Zone X” on Flood Insurance Rate Maps for the area, representing a low to moderate risk.

“Shaded Zone X” refers to properties with reduced risk, and “Zone X” represents an overall lower risk.

In 2011, when new flood insurance maps were being finalized, Flood Plain Administrator Mike Czosnek told Socorro’s city council that the designation for the entire city would be changed to “Zone A,” defined as having a 1 percent chance of flooding in any given year, and 100 percent of homeowners would have to get flood insurance.

Since then, city administrators have learned that if Socorro can get its Diversion Channel Levee system accredited by April 2013, most of the city would be able to keep its “Zone X” designation. Not only that, but river levee improvements planned by the U.S. Army Corps of Engineers might mean the entire city could be designated “Zone X” or “Shaded Zone X” and no one would be required to have flood insurance.

However, that depends on who’s doing the requiring. Even though under the Federal Emergency Management Agency’s mandatory purchase provision, only high risk properties have to have flood insurance, mortgage companies can make it a condition of lending money on low and moderate risk properties.

“Although FEMA doesn’t require flood insurance for ‘Shaded Zone X,’ there are lenders out there that will still require a flood insurance policy,” Lujan said. “Even if the levees are certified, if you’ve got a loan, even a conventional loan, most mortgage companies are going to require some kind of flood insurance, and homeowner’s insurance won’t cover flooding.”

Lujan brought up Hurricane Katrina in 2005, which nearly wiped New Orleans off the map, and Hurricane Ike in 2008, estimated to be one of the costliest hurricanes ever to hit the U.S. In the aftermath of those events, Lujan said, “A lot of people walked away from their notes.”

In light of that, he’s seeing a lot more lenders require flood insurance when they might not have before, Lujan said.

“What really sparked the map changes is there were areas of New Orleans that were considered ‘X’ and shouldn’t have been,” he said.

The good news appears to be that through the National Flood Insurance Program, property owners in areas designated “Shaded Zone X” and “Zone X” may be eligible for a preferred risk low-cost insurance policy.

“For instance, for maximum coverage of $250,000 for a building and $100,000 for the contents would cost $365 per yea, or a dollar a day,” Lujan said. “That’s if you have limited loss history — no more than two prior claims related to flooding.”

No matter who the insurance provider is, any company that writes insurance policies can provide NFIP coverage.

Lujan will be give two presentations at next week’s New Mexico Flood Managers Association Spring Workshop at the Best Western Convention Center. The first, at 9 a.m. on Tuesday, March 13, will be a NFIP Question and Answer session, and the second, at 10:15 a.m. on the same day, is a general insurance question and answer session. Lujan said both of them are open to the public. He said both his presentations are open to insurance agent, lenders, surveyors and engineers, real estate agents and any members of the general public.

“Anyone can come ask their questions, bring their problems,” he said.

During the remainder of the week, Lujan will be stationed at a booth, under an NFIP banner, at the east end of the convention center, to talk with people one-on-one.

“I’ll be easy to find,” he said. “I encourage people to bring elevation certificates and policies with them.”

People can leave their wallets at home, though. Lujan’s advice is free.

One particular piece of advice Lujan has for all property owners is to question what they’re being charged for their flood insurance policy.

“I’ve seen a lot of mis-rating,” he said. “It’s primarily an issue of adequate training.”

Sometimes it’s a simple data entry error or confusion about which piece of information is supposed to be entered in which box.

“They enter the data, the program spits out a number,” Lujan said. “It’s worth double-checking. Don’t just sit back — make sure you’re paying the right amount.”

A rule of thumb is, the cost of a flood insurance policy should be the same no matter who the insurance provider is, and people with similar properties at the same flood zone should be paying the same amount.


-- Email the author at sbarteau@dchieftain.com.

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