Flood Insurance Premiums on the Rise
The National Flood Insurance Program (NFIP) historically has offered subsidized rates to certain structures built prior to a community's full implementation of the Program. These subsidized rates do not reflect the full risk of flood loss to such structures.
On July 6, 2012, the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12) was signed into law. Among other provisions, this Act phases out subsidized rates for certain properties, including for non-primary residences and residences built prior to the community's first Flood Insurance Rate Map (FIRM). The Federal Emergency Management Agency (FEMA) defines the non-primary residence to mean a structure that has not been occupied by the policyholder, or their spouse, for 80% of the policy year. These properties will no longer receive reduced premium rates for flood insurance, and the annual premium rates will increase by 25 percent a year until they reflect the full risk of flood loss. After January 1, 2012, notices will be sent by insurance agents to the owners as their policies are renewed.
Starting August 1, 2012, business properties, severe repetitive loss properties consisting of 1-4 residences and owners of any property that has incurred flood-related damage in which the cumulative amounts of claims payments exceeded the fair market value of their properties will begin seeing the 25 percent increase each year until premiums reflect the full risk of flood loss.
Owners of properties not insured as of the date of the enactment of BW-12, with a lapsed NFIP policy, and property purchased after the date of the enactment of BW-12 will pay full risk rates.
Other buildings, such as primary residences and non-subsidized policyholders affected by map changes, will see an increase of 20 percent per year instead of the previous 10 percent limit, until they reach full risk rates.
This law is intended to make the NFIP financially stable after several severe storms in recent years have drained funds.
For answers to questions regarding these rate changes, please contact your insurance agent.