Understanding the Increased Cost of Compliance (ICC)

Increased Cost of Compliance (ICC) coverage is one of several resources for flood insurance policyholders who need additional help rebuilding after a flood. It provides up to $30,000 to help cover the cost of mitigation measures that will reduce flood risk. ICC coverage is a part of most standard flood insurance policies available under the Federal Emergency Management Agency’s (FEMA’s) National Flood Insurance Program (NFIP).

If you have a policy with the NFIP, your home was damaged extensively by Hurricanes Laura and or Delta and you receive a declaration from your local floodplain administrator that your home is substantially or repetitively flooded, you may qualify for an Increased Cost of Compliance claim. You must have an NFIP Policy to qualify.

ICC coverage provides payment to help cover the cost of mitigation activities that will reduce the risk of future flood damage to a building. When a building covered by a Standard Flood Insurance Policy suffers a flood loss and is declared to be substantially or repetitively damaged, ICC will pay up to $30,000 to bring the building into compliance with State or community floodplain management laws or ordinances. Usually this means elevating or relocating the building so that it is above the base flood elevation (BFE). Non-residential structures may also be floodproofed. ICC coverage applies solely to buildings and only covers the cost of the compliance measures undertaken. It is filed separately from the normal flood insurance claim.

Increased Cost of Compliance

Increased Cost of Compliance (ICC) coverage provides a claim payment, after a direct loss by flood, for the cost to comply with state or community floodplain management laws or ordinances, for example, costs to elevate, relocate, demolish or floodproof (non-residential only) a structure.

There are a few questions you may need to answer to understand everything you need to know regarding the Increased Cost of Compliance. The first question is, do you have flood insurance through the National Flood Insurance Program (NFIP)? If not, then ICC will not apply to you. ICC only applies to those who have insurance through NFIP.

Another question you need to answer is, was your damage from flooding? If damage to your home isn’t from flooding, the ICC will not be able to cover any damages. The ICC will only pay for flood-related damage, and the flood damage must equal 50% or more of your home’s market value prior to the flooding.

The next question you need to answer would be, was your property substantially damaged? A determination will need to be made by the local community that a flood has damaged your home to the point where the repairs will cost 50$ or more of the building’s pre-damage market value. There are numerous ways this could be determined. This percentage may also vary in some jurisdictions, depending on your home location. Your local community officials should notify you by letter if your home was substantially damaged, and if you must comply with the local floodplain management ordinance or laws in effect.

Substantial damage applies in the Special Flood Hazard area (SFHA) and can be from any origin, including wind, water, fire, debris impact and more. Communities may have to address damage resulting from multiple events. All affected structures should be handled consistently. If no repairs are made to a structure after an event, and a second event causes damage, local officials must include all costs to repair damage from both events

Another question you should consider would be, does the damage meet the criteria of a repetitive loss structure? Repetitive loss structures have two or more NFIP flood claims in the past 10 years, and the cost of the repairs was, on average, at least 25% of the pre-flood market value each time. This may only apply if your community’s local floodplain management ordinance has a repetitive loss provision.

Meeting Compliance Standards

ICC coverage can help pay for four different types of mitigation activities to bring a building into compliance with the community’s floodplain management regulations:

Elevation is the most common means of reducing a building’s flood risk. The process consists of raising the building to or above the BFE. While NFIP policy only requires the lowest floor of the building to be raised to the BFE, some States and communities enforce a “freeboard” requirement, which mandates that the building be raised above the BFE to meet the community’s flood protection level.

Floodproofing applies only to non-residential buildings. For a building to be certified as floodproof, it must be watertight below the BFE – the walls must be substantially impermeable to water and designed to resist the stresses imposed by floods. Floodproof- ing techniques include installation of watertight shields for doors and windows; drainage collection systems, sump pumps, and check valves; reinforce- ment of walls to withstand floodwater pressures; use of sealants to reduce seepage through and around walls; and anchoring the building to resist flotation, collapse, and lateral movement.

Relocation involves moving the entire building to another location on the same lot, or to another lot, usually outside the floodplain. Relocation can offer the greatest protection from future flooding; however, if the new location is still within the Special Flood Hazard Area (SFHA), the building must be NFIP- compliant, meaning it must be elevated or floodproofed (if non-residential).

Demolition may be necessary in cases where damage is too severe to warrant elevation, floodproofing, or relocation; or where the building is in such poor condition that it is not worth the investment to undertake any combination of the above activities. All applicable permits must be obtained prior to demolishing the building. The property may be redeveloped after demolition is complete, subject to all applicable Federal, State, and community laws and requirements.

Using ICC in Concert with FEMA Mitigation Grants

In some cases, individual policyholders can take advantage of Federal grant money to supplement the cost of mitigation activities. Policyholders can assign their ICC benefits to their community and enable the community to file a single claim on behalf of a community mitigation project. FEMA will count the ICC claim monies as non-Federal matching funds when applying for mitigation grants, because ICC coverage

is a direct contract between the policyholder and the insurer. The community can then use FEMA mitigation grant funds to help pay for any additional portion of the cost of elevation, floodproofing, relocation, or demolition that is more than the ICC claim payment.

It is extremely important for policyholders and commu- nity officials to work closely together at every stage of this process. Individual participation in a FEMA-funded community mitigation project is voluntary and the community is required to provide mitigation funds to any property owner whose ICC payment was counted towards the matching funds.

Other things to know about ICC:

ICC coverage is in addition to the coverage for the repair of the building’s actual physical damage caused by flooding. The maximum combined amount payable for both the ICC claim and the direct loss claim cannot be greater than the maximum limits of coverage for the type of building:

  • $250,000 for residential and $500,000 for commercial properties. If you receive payment for the maximum coverage limits, you are not able to receive the $30,000 ICC benefit.
  • Work closely with your flood insurance adjuster and your local permitting office to determine your eligibility for ICC and do not begin repair work on your structure before filing an ICC claim.
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