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Welcome to The NFIP’s Basic Agent Tutorial:
Key Fundamentals of Flood Insurance Focused on flood insurance basics for insurance professionals (Part 1)
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Section 1
INTRODUCTION AND GENERAL RULES 3
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• Section 1 – Introduction and General Rules
Here’s our
AGENDA
• Section 2 - Policy Rating, Elevations, Premiums and More • Section 3- Coverage, limitations and Exclusions in the SFIP • Section 4- Loss Settlement Provisions • Section 5- Flood Insurance Resources
This course is divided into two sessions Each session is approximately 2 hours
NFIP Flood Insurance Manual
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Access the NFIP Flood Insurance Manual: • Online at the Flood Insurance Library: http://www.fema.gov/flood-insurance-manual
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Every building is in a flood zone.
Training Agenda
Things Agents Need to Know
Flood insurance can be purchased in any flood zone – not just high-risk flood zones.
The SFIP excludes time-element exposures.
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The Standard Flood Insurance Policy (SFIP) is not a guaranteed replacement cost policy.
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Building and contents coverage limits are usually purchased separately.
A federal disaster declaration is not required for a policyholder to file a flood insurance claim .
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What is a flood?
NFIP definition of “flood”
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What is a flood?
NFIP definition of “flood” • 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 (one of which is your property) from: a. b.
c.
Overflow of inland or tidal waters, Unusual and rapid accumulation or runoff of surface waters from any source, Mudflow.
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What is a flood?
Mudflow • A river of liquid and flowing mud on the surface of normally dry land areas as when earth is carried by a current of water • Not Mudflows:
Source: www.floodsmart.gov
• Landslide • Slope failure • Saturated soil mass
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What is a flood?
Flood Related Erosion • Collapse or subsidence of land along the shore of a lake or similar body of water • Caused by waves or currents of water exceeding cyclical levels
• Results in flooding
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Who has flood risk? • All Property Owners • All Zones
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SFHAs and Non-SFHAs
Special Flood Hazard Areas (SFHAs) • • • •
High Risk Zones AE (replaces A1-A30) A, AH, AO, A99, AR VE (replaces V1-V30), V, VO
Non-Special Flood Hazard Areas (non-SFHAs) • Low to Moderate Risk Zones • B, C, X • D (undetermined)
100-year floodplain = 1% annual chance flood Over 30-year mortgage likelihood grows from 1% to at least 26%
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Flood Insurance Rate Map (FIRM) Training Agenda
SFHAs appear as dark shading on a Flood Insurance Rate Map (FIRM).
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Digital Flood Insurance Rate Map (DFIRM)
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FEMA Map Service Center Locating flood maps: https://msc.fema.gov/
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How is NFIP flood insurance purchased?
How does the NFIP Work?
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Who can buy NFIP flood insurance?
• Community Participation • All Zones
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Participating Communities
FEMA agrees to make flood insurance available
COMMUNITY agrees to adopt and enforce floodplain management regulations
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Community Status Book Report https://www.fema.gov/national-flood-insurance-program-community-status-book
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CBRS System
Ability to write NFIP policies may be restricted in some: • Coastal Barrier Resources Act (CBRA) areas • Otherwise Protected Areas (OPA) • Coastal Barrier Resources Act and Coastal Barrier Improvement Act enacted: • October 18, 1982 • November 16, 1990
Buildings may be ineligible for coverage in participating communities, If constructed on or after identification date.
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How is NFIP flood insurance purchased?
• Write Your Own Company • NFIP Direct Servicing Agent • Licensed Property and Casualty Agent
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Who MUST buy flood insurance?
A or V Zones
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Who MUST buy flood insurance?
Used as security for a loan
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Who MUST buy flood insurance?
Designated Loan
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What is a designated loan? .
A loan secured by a building or mobile home that is located or to be located in a “Special Flood Hazard Area” in which flood insurance is available under the Act
Please note: Emphasis on a “building or mobile home” as collateral
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Who SHOULD buy flood insurance?
Flood Insurance vs. Disaster Assistance
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Flood Insurance vs. Disaster Assistance
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How much NFIP flood insurance can be purchased?
NFIP maximums vary by building type and program limits
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How much flood insurance coverage is available?
Emergency Program
Regular Program
Residential (1-4 family) Building
$35,000
$250,000
Contents
$10,000
$100,000
Other Residential Building
$100,000
$500,000
Contents
$ 10,000
$100,000
Non-Residential Business/Other Non-Residential Building
$100,000
$500,000
Contents
$100,000
$500,000
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When does an NFIP policy become effective?
• 30-day waiting period • Exceptions
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When does an NFIP policy become effective? • There is a 30 day waiting period before new or modified flood insurance policies go into effect. • Exceptions are provided for:
Insurance in connection with a loan transaction. (MIRE)
Wildfire exception
For detailed information, please see the General Rules section of the Flood Insurance Manual
Insurance purchased within 13 months of a map revision (1-day wait).
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KEY NFIP TERMS, TOOLS, AND RULES To use and to live by… 36
Defining Pre-FIRM and Post-FIRM
Pre-FIRM
Built before initial FIRM or On or before 12/31/1974
Post-FIRM On or After the initial FIRM or After 12/31/1974 . . . whichever is LATER
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Full Risk Rates
Full-Risk Rates vs. Subsidized Rates
Represent the building’s true flood risk.
Do not represent the building’s true flood risk.
Premium reflects the risk assumed by the program and all administrative expenses.
Determined with limited underwriting information
Subsidized
Takes into account the full range of possible flood losses.
Discounted rates that have traditionally been available for Pre-FIRM buildings in A or V zones.
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Regular vs. Emergency Program
Emergency Program
Regular Program
• Initial participation phase • Limited amount of coverage • Flood Hazard Boundary Map (FHBM)
• Final phase of participation • Full limits of coverage • Flood Insurance Rate Map (FIRM)
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Base Flood Elevations (BFEs) BFE = 1% Chance Flood
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Preferred Risk Policy Lower Cost
Dwelling Form
Preferred Risk Policy
B,C,X, A99, AR Zones
General Property Form
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Miscellaneous NFIP Rules Evidence of Insurance NFIP Policy Term • 1 year annual term • All policies • NFIP Direct • Write-Your-Own
• Flood insurance application & premium payment • Copy of declarations page • No binders
Community Participation • Probation • Suspension
Rules
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Key Takeaways
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Special Flood Hazard Areas are represented on flood maps as zones A or V.
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NFIP flood insurance can be purchased in communities participating in the NFIP regardless of the flood zone.
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Licensed property & casualty insurance agents write NFIP policies through either private sector Write-Your-Own carriers or the NFIP Servicing Agent.
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NFIP policies are rated using either subsidized or full-risk rates.
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Together We Can Help Property Owners Recover from Flooding
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FEMA recognizes the need to increase flood insurance coverage across the nation. At a national scale, estimates lead us to believe as little as one-third of the residential properties in the Special Flood Hazard Areas have National Flood Insurance Program policies.
“Yet flooding can happen anywhere. Floods are not wholly contained within the SFHA. Over the past ten years, approximately 20 percent of all NFIP claims came from low to moderate-risk policyholders.
“Flood insurance facilitates the ability of a property owner or renter to recover after a flood, whether the insurance is provided by the NFIP or private insurers. FEMA recognizes that there is a growing interest by private insurers to offer flood insurance protection. FEMA supports this because an insured survivor – regardless of where they purchase their coverage – will recover more quickly and more fully.
“FEMA is looking for ways to increase the flood insurance coverage nationally, and more specifically, double the insurance coverage over the next 5 to 7 years. You, as the agent, are the front lines in this, and we ask that you continue to explore ways to support this goal.”
Why is it Important to Grow Your Flood Business? It can and does flood anywhere and everywhere in the United States. By some estimates only one-third of residential property owners in Special Flood Hazard Areas have NFIP policies. Over the past decade, approximately 20% of all NFIP claims came from low to moderate-risk areas. Flood insurance facilitates the ability of a property owner or renter to recover after a flood, whether the insurance is provided by the NFIP or private insurers.
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6 Simple Steps To Grow Your Flood Business
Quote flood insurance every time you quote new business for any property coverage
Utilize the Preferred Risk Policy – low-tomoderate risk areas
Offer flood insurance at each renewal
Target Special Flood Hazard Areas in your marketing territory – consult on mandatory purchase
Establish agency growth goals for flood
Solicit commercial opportunities to write flood - help small businessowners recover
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Quote flood insurance every time Achieve your goals
Utilize the Preferred Risk Policy Offer flood insurance at renewal Target SFHAs in your territory
Establish agency growth goals for flood Solicit more commercial opportunities
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Section 2
POLICY RATING, ELEVATIONS, PREMIUMS AND MORE… 52
Case Study Facts Your client has just purchased a home in Plano, TX, a suburb of Plano, TX Dallas in Collin County, and he approaches you to buy a flood Rating Case Study insurance policy that is required by his lending institution since the house is in flood zone AE. About the home It is a single family dwelling with a detached garage that will be his primary residence. The house was built in 1995. It is a two-story house and, like most homes in Plano, it does not have a basement. Information to gather What do you need to know in order to provide your client a quote? Let’s take a look at the information you would need to gather; how you use and interpret it; and we’ll go step-by-step to develop your client’s quote.
How much flood insurance to buy Since the house and its garage have a replacement cost value well above the NFIP’s $250,000 single family maximum building limit, the new homeowner wants to buy the maximum amount of coverage on the building along with $100,000 worth of coverage for his personal property.
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Rating Elements
Single family dwelling with detached garage Two-story home with no basement Built in 1995 in Plano, TX Flood Zone – AE $250,000 – Building Coverage $100,000 – Personal Property Coverage Minimum deductibles
Plano, TX Rating Case Study
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Step 1
Plano, TX Rating Case Study
Determine Pre-FIRM or Post-FIRM status Utilize Community Status Book https://www.fema.gov/national-flood-insurance-program-community-status-book
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Community Status List https://www.fema.gov/national-flood-insurance-program-community-status-book
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Step 1
Plano, TX Rating Case Study
Determine Pre-FIRM or Post-FIRM status Utilize Community Status Book Initial FIRM Date: 1/02/1980 Year Built: 1995 Post-FIRM Building
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Step 2
Plano, TX Rating Case Study
Locate a FEMA Elevation Certificate Blank Elevation Certificate Form
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What is meant by elevation?
• Lowest Floor Elevation • Elevation Difference
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Elevation Difference • Elevation difference refers to the height of a structure relative to BFE • A structure above BFE is less likely to experience flood damage • Less risk = lower premiums
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What is a Base Flood Elevation? • Anticipated floodwater rise • Regulatory requirement for elevation or floodproofing
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What is a Base Flood Elevation?
• Base flood is a flood that has a 1% chance of being equaled or exceeded. • BFE is the expected height of that 1% chance of flood
Base Flood Elevation 65
Lowest Floor Elevation
BASEMENT
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Why are Elevation Certificates used?
• An EC includes important information for determining a riskbased premium • EC shows: • • • • •
Elevation Certificates (EC)
Location of the building Lowest floor elevation Building characteristics Flood zones Base flood elevation
• See building diagrams in the NFIP Flood Insurance Manual or the EC instructions
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How are Elevation Certificates used?
• An Elevation Certificate: • Certifies building elevation • Documents community compliance • Determines policy rates • Supports map revisions and amendments
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Who Completes an Elevation Certificate? • A surveyor, engineer, or architect must certify the building elevation • Insurance agents use this information for rating
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• Where to locate an Elevation Certificate for a building: • • • • •
Where to find an Elevation Certificate?
Ask the local floodplain manager Ask the sellers Ask developer/builder Check the property deed Hire a licensed land surveyor, professional engineer or certified architect
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FEMA Elevation Certificates Use of Elevation Certificates Pre-FIRM Construction (SFHAs) Not Required: Pre-FIRM subsidized rating Required: Full-risk rating approach .
Non-SFHA zones (B, C, D, and X) Elevation certificates not required
Post-FIRM Construction (SFHAs) Elevation certificates are required
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FEMA Elevation Certificate EC Sections – A thru F
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FEMA Elevation Certificate EC Sections Section A
Section B
Section C
Section D
Sections E,F
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FEMA Elevation Certificate EC Sections Section A
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FEMA Elevation Certificate EC Sections Section B
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FEMA Elevation Certificate EC Sections Section C
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FEMA Elevation Certificate EC Sections Section D
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FEMA Elevation Certificate EC Sections Sections E & F
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FEMA Elevation Certificate Building Diagrams
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FEMA Elevation Certificate Building Diagrams
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FEMA Elevation Certificate Building Diagram 1A
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EC Fact Sheet
Elevation Certificates: Who Needs Them and Why Click here for on-line version
How an EC is used Who needs an EC Where to get an EC When you need an EC When you do not need an EC Useful terms Resources
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Step 3
Plano, TX Rating Case Study
Utilize FEMA Elevation Certificate Determine Elevation Difference
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FEMA Elevation Certificate EC Sections City of Plano - 480140
Collin County
TX
AE
645.3
Single family dwelling | 2-story home - no basement | Built in 1995 in Plano, TX Post-FIRM construction | Flood Zone – AE | Diagram 1A – slab on grade
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FEMA Elevation Certificate EC Sections Collin County
City of Plano - 480140
TX
AE
645.3
Single family dwelling | 2-story home - no basement | Built in 1995 in Plano, TX Post-FIRM construction | Flood Zone – AE | Diagram 1A – slab on grade
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Step 3 Utilize FEMA Elevation Certificate Determine Elevation Difference
Plano Case Study Elevation Difference: +1 Lowest Flood Elevation: Base Flood Elevation: Elevation Difference: Rounds down: +1.0
Plano, TX Rating Case Study
646.4 645.3 +1.1
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Step 4
Plano, TX Rating Case Study
Determine Rating Approach Subsidized rating vs. Full-risk rates
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Reform Legislation Impact
• Individual premium increases *Limits increases to • Includes Reserve Fund 18% Assessment • Does not include: • HFIAA surcharge • Federal Policy Fee
Limits increases to 18%
25% Annual 25% Increases Annual Increases • Subsidized rates for: • Non-primary residences • Business properties • Severe repetitive loss • Substantially Damaged Substantially Improved
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Impact of Biggert-Waters Reform Act How are premiums changing? As of January 1, 2013 • Non-primary residences* • Subsidized rates increase 25% per year upon renewal • Until they reach full risk-rate
Subsidized
25%
25%
25%?
25%?
Full Risk Rates
*A non-primary residence is a single family dwelling, condominium unit, apartment unit, or unit within a cooperative building that will not be lived in by the policyholder or the policyholder’s spouse for more than 50% of the 365 days following the current policy effective date. A policyholder and the policyholder’s spouse may not collectively have more than one primary residence. (See Flood Manual for complete details) 91
Impact of Biggert-Waters Reform Act How are premiums changing? Effective April 1, 2016 • • •
Subsidized rates increase for: • Business properties (non-residential)* Subsidized rates increase 25% per year upon renewal Until they reach full risk-rate
Subsidized
25%
25%
25%?
25%?
Full Risk Rates
*A non-residential business is a building in which the named insured is a commercial enterprise primarily carried out to generate income and the coverage is for: • A building designed as a non-habitational building • A mixed use building in which the total floor area devoted to residential uses is: • 50% or less for single family • 75% or less for all other residential properties • A building designed for use as office or retail space, wholesale space, hospitality space or for 92 similar uses
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Subsidized Rates
Full-Risk Rates
Post-FIRM
Pre-FIRM
$4,551/yr
$617/yr 4 ft above BFE
$4,551/yr
$4,666/yr 1 ft below BFE
$4,551/yr 4 ft below BFE
$12,005/yr
*AE Zone (04/01/17 rates) Bldg- $250,000 Contents- $100,000; Primary Residence, Single-story with no basement, crawlspace or enclosure rates; Zone AE; $2K deductible Bldg./Contents 93 93
Clear Communication of Risk
Access on-line at: www.fema.gov/cost-of-flood
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Clear Communication of Risk
Access on-line at: www.fema.gov/cost-of-flood
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Clear Communication of Risk
Access on-line at: www.fema.gov/cost-of-flood
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• Single family dwelling with detached garage • 2-story home - no basement • Built in 1995 in Plano, TXTX • Post-FIRM construction • Flood Zone – AE • +1 Elevation Difference • $250,000 – Building • $100,000 – Personal Property • Minimum deductibles
Plano, TX Rating Case Study
“Let me get back to you with a quote!”
Key Takeaways
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Pre and Post-FIRM determinations can be made using the NFIP Community Status Book.
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Elevation difference is defined as the difference between a building’s lowest floor and the Base Flood Elevation.
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FEMA Elevation Certificates are required when using full-risk rates on buildings in Special Flood Hazard Areas.
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• Rich Slevin
[email protected]
Contact Info
• Melanie Graham
[email protected] • Rich Waalkes
[email protected] • Mike Moye
[email protected] • Aaron Montanez/Will Lucas
[email protected]
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Thank you for attending!
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