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Paul Girello doesn't have to buy flood insurance anymore.

The Pembroke Pines resident recently received a letter from his mortgage lender confirming his home is no longer in a high-risk flood zone and, as a result, flood insurance coverage is no longer required on his property.

The $400 to $500 he could save by dropping his coverage could buy a new high-definition television for the bedroom, a weekend getaway or a couple of cocktails at a Miami Beach nightclub.

But would it be worth losing the peace of mind that his home and possessions would be covered in case of an unexpected flood?

Girello and tens of thousands of other Broward County residents now have to decide whether dropping their flood coverage — even if it's no longer required — would be a smart thing to do. Thousands of Palm Beach County homeowners will face the same decision in the near future.

Over the past month, mortgage lenders have been sending letters to customers who, until Aug. 18, were required by the federal government to carry flood insurance because they had mortgages with federally backed lenders and lived in zones determined to be at high risk of flooding.

But new flood maps finalized in August by the Federal Emergency Management Agency removed the high-hazard flood designation from most neighborhoods west of the Florida Turnpike, along with other areas throughout the county.

Letters from the lenders are notifying homeowners in Broward County that they are free to cancel their flood insurance.

What customers might not understand, and what most of the lenders' letters are not clearly stating, is that most of the banks will no longer collect escrow payments or allow homeowners to continue rolling their flood insurance payments into their monthly mortgage payments for properties where flood insurance is no longer required.

So homeowners who want to continue to buy discounted lower-risk flood insurance will now have to pay for it directly to their insurance agents.

That's prompting concerns by insurance agents and flood insurance advocates that homeowners might blow off paying a $300 to $400 lump sum at renewal time and not be covered if there's a damaging flood.

"It's definitely going to be a problem," said Rick Winterrowd, an insurance agent in Hollywood.

FEMA's remapping is part of a five-year effort to re-evaluate property owners' flood risks nationwide using modern aerial imagery, revised elevation data, recent flood experiences and input from local engineers. The effort replaces maps in use for decades.

Broward's new maps were finalized on Aug. 18. Preliminary maps for Palm Beach County were unveiled last month, and thousands of homeowners in that county will face the same choice when FEMA finalizes those maps.

Winterrowd said he's been swamped with clients who have called him after receiving letters from their lenders. "There's a lot of confusion. They're asking, 'What do I do?'" he said.

Thousands dropped from flood zones

About 266,000 land parcels in Broward County were taken out of mandatory flood insurance zones. That's 60 percent of all parcels formerly in the zones. About a quarter — 122,000 — remain in mandatory coverage zones, and 31,000 more that were outside the mandatory insurance zones will now be required to buy flood insurance if they have mortgage loans from federally regulated or insured lenders.

Most homeowners who choose to drop their coverage stand to pocket an extra $400 to $500, the typical price charged to customers in high-risk flood zones for the maximum coverage available through the National Flood Insurance Program, covering up to $250,000 for structure replacement and $100,000 to replace the contents.

Letters have gone out to customers of the five largest banks in South Florida — Wells Fargo, Citi, SunTrust, Bank of America and J.P. Morgan Chase.

"Your property is now considered to be minimally exposed to the risk of flooding but not excluded from the risk of flood," the letter from Citi's mortgage branch says. "As a homeowner, you may still want to maintain flood insurance on your property to protect your home and contents."

Wells Fargo and Chase state that escrow accounts set up to collect flood insurance payments are being discontinued. The letter from Chase tells customers they must pay their insurance agent directly if they plan to maintain coverage.

Letters to homeowners from Citi and Bank of America don't address escrow accounts, but a Citi spokesman contacted last week by email said his bank will not escrow for voluntary flood coverage, and a Bank of America spokesman said that lender is likely following the same policy.

Girello isn't sure whether he'll forgo continuing his flood insurance when his current policy expires.

"Mine is paid for the year already," he said. "I may not renew when it comes time to renew."

Girello is president of the homeowners association in Pembroke Lakes, a newer development in Pembroke Pines. About 12 years ago, the neighborhood withstood severe rainstorms with no flooding. "It's designed well. It drains well. We've never had major issues," he said.

It's easy to make a case for rolling the dice. Florida held the largest number of National Flood Insurance Program policies of any state in the U.S. — 2.05 million — in the budget year that began on Oct. 1, 2012. The number of policies in Florida exceeded the combined total of states ranked No. 2 through 7. Yet, just 2,284 claims were filed in Florida that year, amounting to one claim for every 1,000 policyholders.

Florida experienced no hurricane that year.

Roughly 1,200 miles north, the 442,105 policyholders in New York and New Jersey filed 133,600 claims that same year, thanks to an event known as Superstorm Sandy. That's about three claims for every 10 policies.

Fresh memories of Sandy and other storms over the past decade have Broward policyholders feeling cautious.

Julie Casto, who lives west of Interstate 95 in Hollywood, said she was unaware of the flood map changes until she received her letter from Wells Fargo early this month.

After seeking advice from her insurance agent, Casto decided to switch to a "preferred risk" policy. She was able to score close to a $200 discount over her old policy because she's now in a lower-risk zone.

Seeing video footage of recent floods in Arizona and Nevada convinced her that no one is completely safe from the risk of flooding. Plus, FEMA may have revised its maps, but that didn't remove the lake a quarter-block from her home, she said.

'It's not no risk, it's low risk'

Insurance agents say they are reminding customers that although FEMA's new maps removed them from a mandatory flood insurance zone, that doesn't mean their properties are no longer at risk of flooding.

"It's not no risk, it's low risk," said Patty Templeton-Jones, chief operating officer of The Wright Insurance Group, based in St. Petersburg. After the new FEMA maps were finalized, the company began sending letters to homeowners it insures, urging them to switch to the lower-cost "preferred risk" policy. "Flood insurance is the only thing we do. We feel we provide the best education out there," Templeton-Jones said.

Winterrowd points Wells Fargo customers to the sentence in their letter stating nearly 25 percent of claims paid by the National Flood Insurance Program historically have been for properties outside the mandatory flood insurance zone.

"'If we get 20 to 30 inches of rain in a wet hurricane with 100 mph wind, what do you think is going to happen?'" he tells clients. "'Where's that water going to percolate?'"

FEMA officials state the new maps result from drainage improvements and technological advancements in determining elevations and potential flood paths.

In addition, local communities are encouraged to take part in the remapping process by coming forward with additional information that might influence the final maps. Broward County's maps were finalized three years after they were proposed. Public meetings over proposed revisions to Palm Beach County's maps ended last week.

Anyone in South Florida who thinks they're not in a flood zone is mistaken, says Katherine Turk, vice president of Boca Raton-based Century Risk Advisors' private client division.

"We're all in a flood zone," Turk said. By redrawing flood zone maps, FEMA is "recalculating the probability of being in a flood event. They're not saying no one will flood."

Paul Girello, who might not renew his policy in Pembroke Lakes next year, says he resists counseling other homeowners about what to decide.

"I don't think it's my place to give anybody advice on a thing like that," he said. "Some people might want to err on the side of caution. Others might be scrimping to pay their mortgage and could use the extra money."

If you're looking for flood insurance, look no further than us. Call Prestige Insurance Group, Inc. at (305) 969-8776 for more information on Miami flood insurance.

(Article courtesy: Ron Hurtibise via South Florida Sun Sentinel).
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