Homeowners here in northeast Florida are pretty familiar with the National Flood Insurance Program (NFIP). We understand the basics around zones A, or V or X, and most of us have a knowledgeable insurance agent to help us navigate the waters, so to speak.
If you’re thinking of buying a home in northeast Florida, you’ll want to get a solid understanding of flood insurance, as well. Flood insurance premiums, in some cases, can be a deciding factor in whether or not you’ll want to purchase a particular home.
Right now, homeowners and homebuyers alike will want to take a closer look at what’s happening in the flood insurance market. Big changes are coming to the National Flood Insurance Program as a result of the Biggert-Waters Flood Insurance Reform Act of 2012.
While the intent of the act is to bring greater financial stability to the NFIP, some of its provisions could mean drastically higher premiums for homeowners. The most dramatic premium increases aren’t set to take effect until 2014, and numerous groups are lobbying to delay, or even eliminate, those increases. However, there are portions of the act that are already in place and having an impact on the market right now.
New Flood Insurance Rates will Reflect Real Risk
Previously, about 20% of homeowners with flood insurance received a subsidized rate. That helped make flood insurance affordable. And it even applied to second homes.
Still others may have lower premiums due to being “grandfathered” into the rate, even though flood maps or the property’s flood zone was changed. The Biggert-Waters Act will eliminate grandfathering, so a property’s real flood risk will be reflected in the insurance premium.
Already, people with subsidized policies on second homes are seeing their rates rise by 25% annually, until the rate reflects true risk. Beginning in 2014, rates could begin to rise as much as 20% per year on primary residences, until the rate is in line with actual risk.
However, if you have a subsidized rate on your primary residence, you can keep the subsidy until:
- You sell your property
- You let your policy lapse
- You suffer severe, repeated flood losses
- You purchase a new policy
Other changes to note include:
- All required flood insurance must now be escrowed
- Flood policies can no longer be transferred to new homeowners
- Lapsed policies will only be reinstated at the new rate
- Elevation certificates will be required for zones A and V
For more information, download FEMA’s guide to changes due to the Biggert-Waters Flood Insurance Reform Act of 2012. Or contact your insurance agent to learn more about changes to the National Flood Insurance Program.