Skip to content
 

Flood Insurance - Conflicting Zones

Answered by: 
Randy Carey
Dan Persfull

Question: 
I just attended a webinar about Flood Insurance. Something mentioned during the webinar was that there can be a problem if the bank's flood determination is different from the zone determined by an insurance company. An insurance agent I recently spoke to said that a claim wouldn't be denied, but I can't find any hard evidence to show that conflicting zones can be a problem and what the problem would be. Many times a customer obtains a flood policy, oblivious to what zone the insurance agency has listed and we, the bank, are not aware until the policy is paid for and in place. Should the lender have better communication with the customer? Should we give a copy of our determination to the borrower and tell them to show it to the agent? Due to a recent map change we have many existing customers in a flood zone A or AE and many of their policies are coming in with zone X.
Answer: 

Answer by Dan Persfull:Your agent is incorrect. If the flood insurance is written for the incorrect zone the NFIP will not pay any claims until the correct premium for the correct zone is paid. Therefore until that premium is paid you are uninsured. From page 12 of the Mandatory Purchase Guidelines: . . . . If the flood zone designation noted on the SFHDF differs from the zone designation noted on the flood insurance policy, the lender should resolve it and document the reasons. . . . .

Answer: 

Answer by Randy Carey:Be aware that if the customer had the flood insurance policy continuously in effect and their property goes from an X to an A or AE zone, the policy could remain in zone X for rating purposes, as those policies may be grandfathered under certain conditions. Refer to pages 12 and 13 of the Mandatory Purchase Guidelines.

First published on BankersOnline.com 6/30/08

First published on 06/30/2008

Filed under: 
Lending
Filed under lending as: 
Flood
Policies

Report a problem with this page

Search Topics