Living with Levees: Information for Real Estate, Lending and Insurance Professionals

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Information for Real Estate, Lending and Insurance Professionals

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Levees Do Not Eliminate Risk

Living and working near levees comes with risk. Levees may reduce risk during certain flood events, but they do not provide complete protection from flooding. Even without a major flood, levees can fail if they are not properly maintained. Improper drainage, erosion, seepage, subsidence, and even earthquakes can all lead levees to fail and result in catastrophic flooding. Learn how levees work and how they can fail, using FloodSmart’s interactive Levee Simulator tool.

When levees no longer meet the minimum Federal requirements for reducing flood risk, they are shown as de-accredited levees on a community’s flood maps and the area behind them is shown as a high-risk area. Learn more about the three different levee statuses and about the flood risk associated with each.

Reducing Risk – It Is A Shared Responsibility

Knowing and reducing the flood risk in a community is a shared responsibility. As a real estate, lending or insurance professional, it is important for you to understand and properly communicate your clients’ risks associated with levees and the financial benefit provided by flood insurance.

For example, when selling a building, the owner should disclose whether or not the property is located in or soon-to-be in an area designated as a high-risk zone. This includes areas behind a levee that is being de-accredited or is not accredited. Most lenders will require the buyer to purchase flood insurance before the sale closes. For properties located in areas newly designated as high-risk, the NFIP provides rating options to help lower the cost of flood insurance (e.g., Preferred Risk Policy Extension, Grandfathering). Real estate and lending professionals should inform the owner that options are available and insurance professionals should then review all rating options with their client.

Some buildings that are being bought or sold may (or will) be located in areas designated as a moderate- or low-risk flood zone, including properties behind levees that are accredited or provisionally accredited. While the current or new owner will not be Federally required to purchase flood insurance in these areas, a lender can still require it. Lending and real estate professionals should encourage them to strongly consider flood insurance and to talk to their insurance agent for more information, since the flood risk around the levee is just reduced, not removed.

Be An Informed Resource

Real estate, lending and insurance professionals play an important role in helping people purchase and financially safeguard what may be their biggest asset: their home or business. Consequently, home and business owners will turn to you for information. Here are some tips to help better assist your clients.

  • Know the facts about levees. Flooding does occur in areas behind levees and levees can and do fail. Because of these unique flood risks, it is important properties behind levees carry flood insurance, even if they are not shown in a high-risk area. More than 20 percent of all flood claims come from moderate-low risk areas.
     
  • Help your clients understand their risks. Know where the levees are in the communities you service, and what level of risk reduction they provide. You may want to contact local officials to find out what areas are likely to flood should a levee fail or be overtopped. You may also wish to find out if the area is being remapped and if the status of the levee has or will be changing. Remember that levee system construction or restoration projects planned or underway may reduce flood insurance premium rates once the project reaches certain completion milestones.
     
  • Be informed about flood insurance. Flood insurance is required for most loans for properties in the high-risk areas, and it is also strongly recommended for the moderate-risk areas protected by accredited levees where flood insurance policies can be purchased at a significantly reduced cost. For more information on flood insurance, visit FloodSmart.gov. Insurance agents can find additional tools and resources at Agents.FloodSmart.gov.

For More Information

For additional information on levees, levee risk, levee safety and mapping, visit FEMA’s Levee Resources Library or use the resources listed above.

For more information or additional assistance:

Last Updated: 
07/24/2014 - 16:00
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