Are you Flood Insurance Policy Holder?

Published on May 29, 2013 with No Comments

Biggert Waters Flood Insurance Reform Act of 2012

If you have flood insurance or if you think you should have flood insurance but do not. You need to read this article. This article deals specifically with Sections 205 and 207 of the Biggert Waters Flood Insurance Reform Act of 2012. Last year the U.S. Congress passed the Act which calls on the Federal Emergency Management Agency (FEMA) and other agencies to make a number of changes to the way the National Flood Insurance Program (NFIP) is run. Some of these changes have already been put in place, and others will be implemented in the coming months. Key provisions of the legislation will require the NFIP to raise rates to reflect true flood risk, make the program more financially stable, and change how Flood Insurance Rate Map (FIRM) updates impact policyholders. The changes will mean premium rate increases for some – but not all — policyholders over time. However, if you are one of the “some” that is not a very comforting statement.


In 1968, Congress created the National Flood Insurance Program (NFIP). Since most homeowners’ insurance policies did not cover flood, property owners who experienced a flood often found themselves financially devastated and unable to rebuild. The NFIP was formed to fill that gap and was designed to incorporate community adoption of minimum standards for new construction and development to minimize future risk of flood damage. Pre-existing homes and businesses, however, could remain as they were. Owners of many of these older properties were eligible to obtain insurance at lower, subsidized rates that did not reflect the property’s true flood risk.

In addition, as the initial flood risk identified by the NFIP has been updated, many homes and businesses that had been built in compliance with existing standards have received discounted rates in areas where the risk of flood was revised. This “Grandfathering” approach prevented rate increases for existing properties when the flood risk in their area increased.

After 45 years, flood risks continue and the costs and consequences of flooding are increasing dramatically. In 2012, Congress passed legislation they say will make the NFIP more sustainable and financially sound over the long term.

What this means:

The new law eliminates some low rates and discounts which are quote unquote “no longer sustainable.” Most flood insurance rates will now move to reflect full risk, and flood insurance rates will rise. This will happen when one  buys a property, allows a policy to lapse, or purchasing a new policy. You should talk to your insurance agent about how changes may affect your property and flood insurance policy.

What is Changing Now?

Most rates for most properties will be adjusted to in theory accurately reflect risk. Subsidized rates for non-primary/secondary residences are being phased out now. If you have a second home on the beach get ready your notice is coming.  Subsidized rates for certain other classes of properties will be eliminated over time, beginning in late 2013.

Not everyone will be affected immediately by the new law – only 20 percent of NFIP policies receive subsidies. Talk to your agent about how rate changes could affect your policy. Your agent should be able to help you understand if your policy is impacted by the changes. However we do know this:

• Owners of non-primary/secondary residences in a Special Flood Hazard Area (SFHA) will see 25 percent increase annually until rates reflect true risk – began January 1, 2013.

• Owners of property that has experienced severe or repeated flooding will see 25 percent rate increase annually until rates reflect true risk – beginning October 1, 2013.

• Owners of business properties in a Special Flood Hazard Area will see 25 percent rate increase annually until rates reflect true flood risk — beginning October 1, 2013.

Primary residences in SFHAs will be able to keep their subsidized rates unless or until:

• The property is sold;

• The policy lapses;

• You suffer severe, repeated, flood losses; or

• A new policy is purchased.

Grandfathering Changes Expected in 2014

The Act calls for a phase-out grandfathered rates and a move to risk-based rates for most properties when the community adopts a new Flood Insurance Rate Map. Map changes in this part of the country are common. Events, flooding or hurricanes change rate maps and when we are required to adopt a new, updated Flood Insurance Rate Map (FIRM), grandfathered rates will be phased out. This will happen gradually, with new rates increasing by 20% per year for five years. Implementation is anticipated in late 2014.

What Can You Do to Lower Costs?

• Talk to your insurance agent about your insurance options.

• You will probably need an Elevation Certificate to determine your correct rate.

• Higher deductibles might lower your premium.

• Consider incorporating flood mitigation into your remodeling or rebuilding.

o Building or rebuilding higher will lower your risk and could reduce your premium.

o Consider adding vents to your foundation or using breakaway walls.

This new law is the result of an Act of Congress. If you not agree with that action let them know.

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