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Can you get around FEMA’s 50% rule? | Property Insurance Protection Law Blog



Laws are made to be followed and enforced. As a lawyer, it is unethical to advise people to break the law. I get many calls and questions asking me, “How do I get around FEMA’s 50% rule?”

The answer is that everyone must follow the 50% rule. A damaged structure will either be determined to be above or below the 50% determination under federal and state law.

The next question is: “Does the insurance claim amount have an impact on the 50% rule?” Technically, the answer is “no”. On the other hand, you can’t fool an insurer or the government. The repair estimates and pricing for the insurance claim should be honest. If it is honest and well over 50% of the structure̵

7;s market value, I would suggest that it will be very difficult to expect avoidance of a negative 50% determination.

The FEMA 50% issue is really about property law rather than insurance coverage law. A Southwest Florida real estate law firm, Grant Fridkin Pearson, noted the following:

The FEMA 50% rule only looks at the market value of the structure/improvement on the property, and not the land value, when calculating the FEMA 50% rule value. Most local jurisdictions use the property appraiser’s value for the structure/improvement, but allow the property owner to obtain their own appraisal to determine the value of the structure/improvement.

Below is an examination of how local jurisdictions have implemented the FEMA 50% rule:

1. The City of Naples looks at the cost of improvements or repairs to a structure within a one (1) year period to determine compliance with the FEMA 50% rule. To value the structure, the City of Naples currently looks at the Collier County Property Appraiser’s assessed value of the structure and adds 20%. However, the property owner has the option of providing an independent appraisal prepared and certified by an authorized appraiser.

2. Collier County appears to base the cost of improvements/repairs applicable to the FEMA 50% rule value on each individual permit drawn instead of evaluating total costs over a specified time period. The value of the structure is currently determined by the Collier County Property Appraiser’s assessed value. However, the property owner has the option of providing an independent appraisal prepared and certified by an authorized appraiser.

3. Lee County looks at the cost of improvements or repairs to a structure within a five (5) year period to determine compliance with the FEMA 50% rule. To value the structure, Lee County currently looks at the Lee County Property Appraiser’s assessed value of the structure and adds 20%. However, the property owner has the option of providing an independent appraisal prepared and certified by an authorized appraiser.

Local building officials must follow state and federal rules and regulations. The federal government will not look the other way if the local building officials do not follow the FEMA 50% rule.

I suggest that policyholders who are concerned about this issue also become very familiar with FEMA Significant improvement/significant damage Desktop reference. I also encourage you to read my previous post on this topic: Significant damage and questions about FEMA’s 50% rule.

Today’s thought

The government cannot enforce its mountain of laws and regulations without voluntary compliance.
-Charles Murray


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