The Increased Cost of Compliance (ICC) coverage within a Standard Flood Insurance Policy (SFIP) provides financial assistance to policyholders to help cover the costs associated with complying with state or community floodplain management regulations after a flood event. In Ohio, this coverage is particularly relevant due to the state’s adherence to the National Flood Insurance Program (NFIP) and its own floodplain management regulations outlined in Ohio Revised Code (ORC) Chapter 1521. ICC coverage is triggered when a structure is declared substantially damaged or repetitively damaged by the local floodplain administrator. Substantial damage typically means the cost to repair the damage equals or exceeds 50% of the structure’s pre-damage market value. Repetitive loss generally refers to two or more flood losses within a 10-year period, where the cumulative damage equals or exceeds the structure’s market value. The maximum ICC coverage available under an SFIP is $30,000. This coverage can be used to elevate, demolish, or relocate the structure to bring it into compliance with current floodplain management regulations. ORC Chapter 1521 mandates that communities participating in the NFIP enforce these regulations, ensuring that new construction and substantial improvements are protected from future flood damage. The ICC coverage helps property owners meet these requirements, reducing future flood risks and potential losses. Failure to comply with these regulations can result in penalties and ineligibility for future flood insurance coverage.

The Flood Disaster Protection Act of 1973 and the National Flood Insurance Reform Act of 1994 established the mandatory purchase requirement for flood insurance. This requirement mandates that properties located in Special Flood Hazard Areas (SFHAs) and secured by a mortgage from a federally regulated or insured lender must maintain flood insurance coverage. In Ohio, this has significant implications for both lending practices and homeowners. Lenders are required to determine if a property is located in an SFHA. If it is, they must notify the borrower of the flood risk and the requirement to purchase flood insurance. Failure to enforce this requirement can result in penalties for the lender, including fines and the potential loss of federal deposit insurance. For homeowners, non-compliance with the mandatory purchase requirement can have severe consequences. If a property owner fails to maintain flood insurance, the lender is authorized to force-place coverage, which is typically more expensive and provides less comprehensive coverage than a policy purchased by the homeowner. Furthermore, without flood insurance, homeowners are personally responsible for covering all flood-related damages, which can be financially devastating. The Ohio Department of Natural Resources (ODNR) also emphasizes the importance of flood insurance in its floodplain management programs, highlighting the financial risks associated with being uninsured in an SFHA.

In the context of flood insurance claims under the Standard Flood Insurance Policy (SFIP), “replacement cost value” (RCV) and “actual cash value” (ACV) represent different methods of valuing insured property and determining the amount of compensation paid out in the event of a covered loss. Replacement Cost Value (RCV) is the cost to replace damaged property with new property of like kind and quality, without deduction for depreciation. RCV is generally available for single-family dwellings that are the policyholder’s primary residence and are insured to at least 80% of their replacement cost or the maximum coverage available under the SFIP. Actual Cash Value (ACV) is the replacement cost of the property at the time of loss, less depreciation. Depreciation accounts for the age, condition, and obsolescence of the property. ACV is typically used for contents coverage and for buildings that do not qualify for RCV coverage, such as secondary residences, commercial properties, and buildings insured for less than 80% of their replacement cost. Choosing between RCV and ACV significantly impacts both the premium and the compensation received. RCV policies generally have higher premiums because they provide more comprehensive coverage. In the event of a flood loss, an RCV policy will pay for the full cost of replacing the damaged property with new property, up to the policy limits. An ACV policy has lower premiums but will only pay the depreciated value of the damaged property, which may not be sufficient to fully replace it. Therefore, homeowners in Ohio must carefully consider their financial situation and risk tolerance when selecting between RCV and ACV coverage.

The Community Rating System (CRS) is a voluntary incentive program within the National Flood Insurance Program (NFIP) that recognizes and encourages community floodplain management activities that exceed the minimum NFIP requirements. By implementing these activities, communities can reduce flood insurance premiums for their residents. Ohio communities can participate in the CRS by applying through FEMA and demonstrating that they are undertaking eligible activities. These activities are grouped into four categories: public information, mapping and regulations, flood damage reduction, and flood preparedness. Examples include maintaining open space in floodplains, implementing stricter building codes, providing public outreach on flood safety, and conducting flood hazard mapping beyond the minimum NFIP requirements. The CRS assigns a class rating to participating communities based on the number of credit points they accumulate for their activities. The class ratings range from 1 to 10, with Class 1 representing the highest level of floodplain management and resulting in the largest flood insurance premium reductions. For example, a Class 1 community can receive up to a 45% discount on flood insurance premiums, while a Class 9 community may receive a 5% discount. The benefits of CRS participation extend beyond premium reductions. Communities that actively manage their floodplains are better protected from flood damage, reducing the risk of property loss and displacement. This also enhances community resilience and promotes sustainable development. The Ohio Department of Natural Resources (ODNR) encourages communities to participate in the CRS as part of its overall floodplain management strategy.

The concepts of “substantial improvement” and “substantial damage” are critical components of the National Flood Insurance Program (NFIP) and are integral to Ohio’s floodplain management regulations. These definitions determine when a property must be brought into compliance with current floodplain management standards. Substantial improvement refers to any reconstruction, rehabilitation, addition, or other improvement of a structure, the cost of which equals or exceeds 50% of the market value of the structure before the start of construction of the improvement. Substantial damage means damage of any origin sustained by a structure whereby the cost of restoring the structure to its before-damaged condition would equal or exceed 50% of the market value of the structure before the damage occurred. In Ohio, these definitions are enforced by local floodplain administrators in accordance with Ohio Revised Code Chapter 1521. When a property in an SFHA is determined to be substantially improved or substantially damaged, the owner is required to bring the entire structure into compliance with current floodplain management regulations. This typically involves elevating the structure above the base flood elevation (BFE), floodproofing it, or, in some cases, demolishing and rebuilding it. The implications for property owners are significant. Compliance can be costly and time-consuming, but it is essential to reduce future flood risks and maintain eligibility for flood insurance. Failure to comply can result in penalties, including fines and the denial of future building permits. The Increased Cost of Compliance (ICC) coverage under the SFIP can help offset some of these costs, but it is limited to a maximum of $30,000.

Elevation certificates play a crucial role in determining flood insurance rates, particularly for properties located in Special Flood Hazard Areas (SFHAs) in Ohio. An elevation certificate is an administrative tool used by the National Flood Insurance Program (NFIP) to provide elevation information necessary to ensure compliance with community floodplain management ordinances and to accurately rate flood insurance policies. The elevation certificate includes various pieces of information, such as the property’s location, the building’s construction date, the flood zone designation, the base flood elevation (BFE), and the elevation of the lowest adjacent grade and lowest floor relative to the BFE. This data is used to assess the property’s flood risk and determine the appropriate flood insurance premium. Properties with elevations above the BFE generally have lower flood insurance premiums, while those below the BFE have higher premiums due to the increased risk of flooding. The accuracy of the elevation certificate is paramount. Property owners are responsible for hiring a licensed surveyor, engineer, or architect to complete the certificate. Surveyors are responsible for accurately measuring and documenting the elevation data. Any errors or omissions on the certificate can lead to incorrect flood insurance rates, potentially resulting in overpayment or underpayment of premiums. In Ohio, local floodplain administrators also rely on elevation certificates to verify compliance with floodplain management regulations and to ensure that new construction and substantial improvements are adequately protected from flooding.

The Standard Flood Insurance Policy (SFIP) has specific limitations regarding coverage for basements and enclosed areas, which significantly impact homeowners in Ohio, where basements are common. The NFIP defines a basement as any area of a building with a floor that is subgrade (below ground level) on all sides. Coverage for basements is limited under the SFIP. While structural elements and essential equipment are typically covered, personal belongings and finished living spaces are generally excluded. Covered items typically include: foundation elements, essential equipment such as furnaces, water heaters, and air conditioners, staircases, and unfinished drywall. Common exclusions in basements include: personal property such as furniture, clothing, and electronics; finished walls, floors, and ceilings; and improvements such as carpeting and paneling. These limitations mean that homeowners in Ohio with finished basements may not receive full compensation for flood damage to these areas. These limitations can have a significant financial impact on homeowners in Ohio. Given the prevalence of basements, many homeowners use them as living spaces or storage areas. Flood damage to these areas can result in substantial out-of-pocket expenses for repairs and replacements. It is crucial for Ohio homeowners to understand these limitations and consider supplemental flood insurance or other risk management strategies to protect their property.

The NFIP defines “flood” as a general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties (at least one of which is your property) from: overflow of inland or tidal waters; unusual and rapid accumulation or runoff of surface waters from any source; or mudflow. For a loss to be covered, the flood must be the proximate cause of the damage. The “two-acre rule” means that even if only one property is affected, coverage may apply if at least two acres are inundated. If multiple properties are involved, only one needs to be the insured property for coverage to potentially apply, assuming the inundation meets the definition of a flood. This definition is crucial because it determines the scope of coverage under the NFIP. The NFIP Flood Insurance Manual provides detailed guidance on interpreting this definition and applying it to specific loss scenarios.

Increased Cost of Compliance (ICC) coverage is a component of the Standard Flood Insurance Policy (SFIP) that provides financial assistance to policyholders who must comply with local floodplain management ordinances or laws after a flood event. Specifically, ICC coverage applies when a structure is declared substantially damaged (where the cost to repair the damage equals or exceeds 50% of the structure’s pre-damage market value) or repetitively damaged (defined as two or more flood losses where the cumulative cost of repairs equals or exceeds 50% of the structure’s market value). The maximum ICC coverage available is $30,000. This coverage can be used for various mitigation activities, including elevation, floodproofing (for non-residential structures), relocation, or demolition of the structure. The NFIP Flood Insurance Manual and 44 CFR Part 59 outline the specific requirements and limitations of ICC coverage.

The NFIP operates under two phases: the Emergency Program and the Regular Program. The Emergency Program is the initial phase, allowing communities to become eligible for flood insurance before detailed Flood Insurance Rate Maps (FIRMs) are developed. Coverage limits are lower under the Emergency Program. For example, single-family homes typically have a maximum building coverage of $35,000 and contents coverage of $10,000. The Regular Program begins after FIRMs are in place, providing more comprehensive coverage. Single-family homes can then be insured up to $250,000 for building coverage and $100,000 for contents. Communities must meet certain floodplain management requirements to participate in either program, but the requirements are more stringent in the Regular Program. Property owners in Emergency Program communities face lower coverage limits and may pay higher premiums relative to the coverage received.

“Substantial improvement” refers to any reconstruction, rehabilitation, addition, or other improvement of a structure, the cost of which equals or exceeds 50% of the market value of the structure before the start of construction of the improvement. “Substantial damage,” on the other hand, refers to damage of any origin sustained by a structure whereby the cost of restoring the structure to its before-damaged condition would equal or exceed 50% of the market value of the structure before the damage occurred. If a property owner undertakes a substantial improvement to a structure in a SFHA, the structure must be brought into compliance with current floodplain management regulations, which may include elevating the structure, floodproofing it (for non-residential structures), or relocating it. Failure to comply can result in denial of flood insurance coverage and potential enforcement actions by the local community. These requirements are outlined in 44 CFR Part 59 and local floodplain management ordinances.

The Community Rating System (CRS) is a voluntary incentive program that recognizes and encourages community floodplain management activities that exceed the minimum NFIP requirements. Under the CRS, flood insurance premium rates are discounted to reflect the reduced flood risk resulting from community activities. The CRS uses a class system, ranging from Class 1 (highest level of floodplain management) to Class 10 (no CRS participation). A community’s CRS rating directly impacts flood insurance premiums for policyholders within that community. For example, a Class 1 community receives a 45% discount on flood insurance premiums, while a Class 9 community receives a 5% discount. Communities can improve their CRS rating by implementing various activities, such as providing public information about flood hazards, maintaining open space in floodplains, and adopting stricter building codes. The CRS Coordinator’s Manual provides detailed guidance on the CRS program and the activities that qualify for credit.

The Base Flood Elevation (BFE) is the elevation to which floodwater is anticipated to rise during a base flood, which has a 1% annual chance of being equaled or exceeded in any given year (also known as the 100-year flood). The BFE is a critical factor in determining flood insurance rates and establishing building requirements in Special Flood Hazard Areas (SFHAs). Structures built below the BFE are at a higher risk of flooding and therefore face higher flood insurance premiums. Furthermore, many communities require new or substantially improved structures in SFHAs to be elevated to or above the BFE. BFEs are typically determined through engineering studies and are depicted on Flood Insurance Rate Maps (FIRMs). Property owners can determine the BFE for their property by consulting the FIRM for their area, contacting their local floodplain administrator, or using online tools provided by FEMA.

The Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12) aimed to make the NFIP more financially stable by phasing out subsidized flood insurance rates and transitioning to risk-based rates. This resulted in significant premium increases for many policyholders, particularly those with properties that were previously grandfathered (i.e., allowed to maintain lower rates based on outdated flood maps) or subsidized (i.e., receiving rates below the true actuarial risk). The Homeowner Flood Insurance Affordability Act of 2014 (HFIAA) partially rolled back some of the changes introduced by BW-12, including capping annual premium increases and reinstating grandfathering provisions for some properties. However, HFIAA did not eliminate the move towards risk-based rates entirely. These legislative changes have had a significant impact on the affordability and availability of flood insurance, prompting ongoing debate and adjustments to the NFIP.