Flood Training Guide

1. Flood Training Guide Presented by District 65

2. Tropical Storm Allison “The RAIN of Terror” June 2001 The most devastating Rain and Flooding in the History of Houston, Texas

3. Tropical Storm Allison “The RAIN of Terror” June 2001

4. View of the Tunnel System Downtown

5. View of the Tunnel System Downtown

6. Jet Sking in the flood waters on Interstate Highway I-10

7. Canoeing down HWY 59 near the Compaq Center

8. A view of a 3-way Intersection located at Allen Parkway and Sanford Street

9. One of hundreds of unfortunate family members within the greater metropolitan area trying to make their way to dry land.

10. Processing/ Underwriting and Service: Ph:888-391-2810 Fax:800-380-4783 Claims: Ph: 888-391-2810 Fax: 800-380-4783 Key Contact

11. Getting StartedYou will need: • Flood Rating Software • Forms and Applications • Flood Zone Determination Maps • Community Master Files • Elevation Certificate ***Flood Insurance Manual available through the National Flood Insurance Program (NFIP) for $25.00

12. Definitions • Flood Insurance: a product that provides coverage to insured buildings and insured contents when damage occurs due to direct physical loss by or from flood. • Flood:A. A general temporary condition of partial or complete inundation of normally dry land areas from:1) Overflow of inland or tidal areas.2) The unusual and rapid accumulation of surface waters from any source.3) MudslidesB. The collapse or sinking of land along the shore of a lake or other body of water as a result of erosion, waves or currents of water greater than the normal levels which result in flooding described in A-1.

13. Definitions Cont.’ • National Flood Insurance Program (NFIP): A federal program enabling property owners to purchase flood insurance. It provides an alternative to disaster assistance to meet the escalating costs of repairing damage to buildings and their contents caused by flood. The NFIP laws allow the federal government to make flood insurance available through private-sector insurance companies to communities that agree to implement protective measures to reduce future flood risks to new construction in special flood hazard areas.

14. All About NFIP • Congress established the NFIP and approved the National Flood Insurance Act of 1968. Then, in 1973 the Act was broadened and modified with the passage of the Flood Disaster Protection Act. It is administered by the Federal Insurance Administration (FIA), a component of FEMA. • Congress established the NFIP as a proactive approach to mitigating future damage and providing insurance protection for property owners against potential losses. • NFIP is subject to the rules and regulations of the FIA. FIA has elected to have state-licensed insurance companies’ agents and brokers sell flood insurance to consumers. Therefore, the agents and brokers are held accountable by their state regulators to provide NFIP customers with the same level of standards and service they would provide selling their own lines of insurance.

15. NFIP Cont.’ • “Write Your Own” (WYO) Program: Established in 1981 as an effort to reinvolve private-sector insurance companies. • Goals of WYO program:1. Increase the NFIP policy base and the geographic distribution of policies 2. Improve service to NFIP policyholders through the infusion of insurance industry knowledge 3. Provide the insurance industry with operating experience for flood insurance. • Benefits of WYO:* no competition in rates* training programs*Personal Computer Software Program*Mapping Services Department

16. NFIP Cont.’ • The NFIP benefits property owners and taxpayers alike by protecting against devastating losses resulting from flood disasters. Also, community management of future construction and development of floodplains can reduce the probability of flood losses and the costs associated with flood disaster relief.

17. NFIP Cont.’Definitions • Floodplain: Flood hazard areas are determined by using statistical analyses of records of riverflow, storm tides, and rainfall; information obtained through consultation with the community; floodplain topographic surveys; and hydrologic and hydraulic analyses. The Flood Insurance Study (FIS) covers those areas subject to flooding from rivers and streams, along coastal areas and lake shores, or shallow flooding areas. • FloodplainManagement: refers to an overall community program of corrective and preventive measures for reducing future flood damage. These measures take a variety of forms and generally include zoning, subdivision, or building requirements, and special-purpose floodplain ordinances.

18. NFIP Cont.’Definitions • Community: any state, area or political subdivision; any Indian tribe, authorized tribal organization or Alaska native village or authorized native organization which has the authority to adopt and enforce floodplain management ordinances for the area under its jurisdiction. In most cases, it is either an incorporated city, town, township or village, or an unincorporated area of a county or parish. Some states have statutory authority that varies from this description, however. • Participation in the NFIP is community-based rather than individual because the potential for loss cannot be reduced sufficiently to affect disaster relief costs unless the community as a whole is practicing adequate flood hazard mitigation. Insurance rates would also reflect a higher probability for flood losses without the communities participation.

19. NFIP Cont.’ • Community participation in NFIP is voluntary. • If a community does not participate in NFIP and has been identified on a Flood Hazard Boundary Map (FHBM) or Flood Insurance Rate Map (FIRM) for a year and the community does not take the necessary steps to participate, federal financial assistance, will not be available for buildings in the Special Flood Hazard Area. • If a Presidentially declared flood disaster occurs in a nonparticipating community, no federal financial assistance can be provided for the permanent repair or reconstruction of insurable buildings in Special Flood Hazard Areas.

20. General Considerations: Policy Forms • Policy Forms for the Special Flood Hazard Areas (SFHA): 1. Dwelling (Single-family, 2-4 family residential buildings, residential condominium units) 2. The General Property (Residential buildings of 4+ units, nonresidential buildings, non-household contents) 3. The Residential Condominium Building Association (Residential Condominium Association Buildings)

21. Scheduled Buildings • Scheduled building policy: a policy that requires a specific amount of insurance to be designated for each building and its contents. To qualify all buildings and/or their contents must: • Have the same ownership • Have the same location which is owned or leased by the insured; • Have the same occupancy type: (single-family dwelling, 2-4 family dwelling, other residential, nonresidential, or small business.)

22. General Considerations: Policy Forms and Scheduled Buildings Definition – Small Business Any business having (with its affiliates) assets not in excess of $6 million, net worth not in excess of $2.5 million and an average net income, after federal income taxes, for the preceding two years not in excess of $250,000 (computed with carryover loss).

23. Building Eligibility Insurance can be written only on walled and roofed buildings which are principally above ground and are permanently affixed to sites. Also eligible are silos and grain storage buildings. Special Considerations for the manufactured or mobile home will be addressed again in other sections. However, some of these considerations are: • Home must be on a permanent foundation; • Home must be affixed to a permanent site; • Home must be anchored. SECTION 13.

24. Building Eligibility Buildings entirely over water also have special policy guidelines. Any building that is entirely over water and constructed before October 1, 1982, should follow instructions for a “submit for rate.” Buildings that are entirely over water and constructed after October 1, 1982 are not eligible for coverage. Buildings that are partially over water that were built or improved after October 1, 1982, must be submitted for underwriting and premium determination as well as eligibility.

25. The Flood Insurance Application This section of your workbook will “walk you through” the Flood Insurance Application, section by section, so that you will gain a better understanding of the procedures and reasoning behind the required information or calculations. Keep in mind: the more accurate and complete the application, the more quickly the application will be processed.

26. The Flood Insurance Application The application consists of several sections. The entire application must be completed when the structure to be insured is Post FIRM or Pre FIRM, using optional Post FIRM rates and is located in all zones except B, C, D, X, AO, and A99. Post- and Pre-Firm definitions are found in the Rating Information section of this training guide (page 26). A sample application can be found on page 11. Note that the application also serves as an Endorsement Form. Instructions for when and how to complete an Endorsement are covered in this workbook.

27. The Flood Insurance Application The following sections consist of basic general information. • Agent’s Name and Address • Agent’s Number – the seven digit Farmers Agent code. (Important if you want to get paid)! • Current Policy Number – filled out when you are using this form as an endorsement request or when you are moving another WYO or NFIP policy to Farmers at renewal. • Agent’s Phone Number • Policy Type – New or Renewal.

28. The Flood Insurance Application • General Information These sections must be filled in with the month, day, and year for policy effective date and expiration. **Effective Dates** To determine effective date of the policy, the date the premium is collected plus thirty days will equal the effective date. Flood insurance coverage, therefore, is effective Thirty days after the agent completes the application and collects the premium for the policy, provided that the application is received by the companies’ processing office within 10 days of the signature date on the application. **Important: If the application is received more than 10 days after the signature date, the effective date will be 30 days from the date companies’ processing office receives the application**

29. The Flood Insurance Application • Term – The policy can be written for a period of one year only. • Wait Period – (Standard 30 Days) Check this box if the policy is being written with a 30 day waiting period, which is the standard 30 day waiting period.

30. The Flood Insurance Application • Exception to 30-day waiting period – Portfolio Review: The 30 day waiting period does not apply when the lender requires flood insurance for a mortgage. The coverage is effective upon the completion of an application and the collection of the premium payment. • Initial purchase of flood insurance related to • Loan no waiting: You will check this box only when the policy is being purchased in connection with a loan closing. When this box is checked, your effective date will be the same date as the closing date, and the 30 days standard waiting period mentioned previously can be waived.

31. The Flood Insurance Application • NOTE: If the policy is written in connection with making, increasing, extending, or renewing a loan, then the effective date is the same date of the closing, provided the premium is paid at or before closing. If the premium is paid after closing, then the 30 day waiting period applies.

32. The Flood Insurance Application • Emergency program – There is only a one day waiting period during the 30 day period which follows a community’s initial eligibility for flood insurance under the Emergency Program or conversion to the Regular Program. • Map Revision – This box must be checked only when the policy is being purchased in connection with a map revision (zone changed from NSFHA to SFHA and policy is being obtained within 13 months of the map revision). When this box is checked, your effective date will be one day after the date the premium is collected and the 30 day waiting period is waived.

33. The Flood Insurance Application • Applicant’s: Name/ Mailing Address / Social Security # / Telephone # • Direct Bill To – this section must be completed to ensure proper billing at renewal time; only one box can be checked. If you select Other or First Mortgagee, then you must provide the name, address, and loan number, if applicable.

34. The Flood Insurance Application 1. If you write the application on Sept. 23 and receive the premium the same day, what is the effective date of the policy? Answer: October 23, provided the application and premium are received by the processing office within 10 days.

35. The Flood Insurance Application • Your customers, Jack and Martha Hess, are buying a new home, and their lender has told them they must purchase flood insurance. You are writing their homeowners policy, and they write you a check for both the homeowners and flood insurance before their closing date so they can go to the closing with paid receipts. What is the effective date of the flood insurance policy? And, by the way, how do you instruct them to make out their check for the flood insurance? Answer: The effective date is the same date as the closing/purchase date (Loan no waiting). This is provided that the premium is paid at or before closing and the check is made payable to Farmers Insurance (the check should be separate from the Homeowners insurance premium payment).

36. The Flood Insurance Application • If the lender in Question #2 requires an escrow account for insurance, what box do you check on the application? Answer: Check “Bill First Mortgagee.” • Your customer is refinancing their mortgage, and the lender has told them flood insurance is required. What will be the effective date of the policy? Answer: The date of the closing.

37. The Flood Insurance Application • Your customer receives a letter from their lender advising them they need to purchase flood insurance on a property they have owned for five years. The letter goes on to say if they do not purchase flood insurance, the lender will force a policy. Your customer purchases a policy from you as a result of this letter. What will the effective date of the policy be? Answer: The date payment is received.

38. Myths and Facts About the NFIP • Myth: You can’t buy flood insurance if you are located in a high risk flood area. • Fact: You can buy Federal flood insurance no matter where you live provided that your community belongs to the NFIP, except in Coastal Barrier Resources System (CBRS) areas. The Program was created in 1968 to provide affordable flood insurance to people who live in areas with the greatest risk of flooding, called Special Flood Hazard Areas (SFHAs). In fact, under the National Flood Insurance Act, lenders must require borrowers whose property is located within an SFHA to purchase flood insurance as a condition of receiving a Federally-backed mortgage loan. There is an exemption for conventional loans on properties within CBRS areas. Lenders should notify borrowers that their property is located in an SFHA and that affordable Federal flood insurance is available.

39. Myths and Facts About the NFIP • Myth – You can’t buy flood insurance immediately before or during a flood. • Fact – You can purchase flood coverage at any time. There is a 30-day waiting period after you’ve applied and paid the premium before the policy is effective, with the following exception: 1) If the initial purchase of flood insurance is in connection with the making, increasing, extending, or renewing of a loan, provided application and collection of the premium is made at or prior to loan closing. 2) If the initial purchase of flood insurance is made during the one-year period following the issuance of a revised flood map for a community, there is a one-day waiting period.

40. Myths and Facts About the NFIP Continued – The policy does not cover a “loss in progress,” defined by the NFIP as a loss occurring as of 12:01 a.m. on the first day of the policy term. In addition, you cannot increase the amount of insurance coverage you have during a loss in progress.

41. Myths and Facts About the NFIP • Myth – Homeowners insurance policies cover flooding. • Fact – Unfortunately, many homeowners do not find out until it is too late that their homeowners policy does not cover flood losses. Federal flood insurance protects your most valuable assets – your home and belongings!

42. Myths and Facts About the NFIP • Myth – Flood insurance is only available for homeowners. • Fact – Flood insurance is available to protect homes, condominiums, apartments, and non residential buildings, including commercial structures. A maximum of $250,000 for building coverage is available for single family residential buildings; $250,000 per unit for multi-family residences. The limit for contents coverage on all residential buildings is $100,000, which is also available to renters! Commercial structures can be insured to a limit of $500,000 for the building and $500,000 for the contents.

43. Myths and Facts About the NFIP • Myth – You can’t buy flood insurance if your property has been flooded. • Fact – It doesn’t matter how many times your home, apartment, or business has flooded. You are still eligible to purchase flood insurance, provided that your community is participating in the NFIP.

44. Myths and Facts About the NFIP • Myth – Only residents of high risk flood zones need to insure their property. • Fact – Even if you live in an area that is not flood-proned, it’s advisable to have flood insurance. One third of the NFIP’s claims come from outside the high risk flood areas. The NFIP’s Preferred Risk Policy, available for as little as $80 per year, is designed for residential properties located in low to moderate flood risk zones.

45. The Flood Insurance Application • Property Location – Check “yes” if it is the same as the mailing address and “no” if it is different and provide the correct property location. • Primary and Second Mortgagee/Loss Payee or Other Payor. Provide name, address, phone number, and loan number. The loan number is important for the lender to identify the policy with the property.

46. The Flood Insurance Application Rating Information: You must identify the community the property is located in. This can be done in conjunction with ordering a flood zone determination, which can be done on-line at www.farmersflood.com or by calling flood customer service. A NFIP Community Status Book also has this information available.

47. The Flood Insurance Application Program Participation – When a particular community wishes to participate in the NFIP, it applies to FEMA, the Federal Emergency Management Agency. FEMA then conducts a study using the Army Corps of Engineers. After the study is completed, Flood Hazard Boundary Maps are produced, and the community enters the initial phase of the program, the EMERGENCY PROGRAM.

48. The Flood Insurance Application • Emergency Program – The initial phase of a community’s participation in the NFIP and is designed to provide a limited amount of insurance at federally subsidized rates prior to the effective date of the community’s initial Flood Insurance Rate Map. A community participating in the emergency program is provided with a Flood Hazard Boundary Map and is required to adopt limited measures aimed at control of the future use of its floodplains.

49. The Flood Insurance Application • Emergency Program: During the Emergency Program, there is only limited coverage available: Building:Contents: Single Family $35,000 Residential: $10,000 Other Residential $100,000 Nonresidential:$100,000 Nonresidential $100,000 In Alaska, Guam, Hawaii, and U.S. Virgin Islands: $50,000 $150,000

50. The Flood Insurance Application • After the Corps of Engineers has completed its detailed survey of the land, they establish zones according to the severity and probability of the frequency of flooding in these areas. After the zones are determined, maps are printed for the community, FLOOD INSURANCE RATE MAPS (FIRM). • Once these maps are issued, the community can enter in to the REGULAR PROGRAM.