Flood Insurance Rate Increases

Last year Congress passed the Biggert-Waters Flood Insurance Reform Act of 2012 ("Biggert-Waters") that made major changes to the flood insurance premiums many homeowners pay. Under the new law, owners must pay the full-risk rate, the rate that accurately reflects the full risk of being flooded without government subsidies. Previously, the government subsidized the insurance of many homes and insurance rates were based on older flood maps showing lower risk. Provisions of Biggert-Waters require the National Flood Insurance Program to raise insurance rates for some older properties in high-risk areas to reflect true flood risk. The bill went into effect on Oct. 1, 2013. Homeowners in some of the hardest hit areas saw their flood insurance premiums increase drastically.

Therefore homes in the FEMA Flood Hazard Zones sold after October 1, 2013 will have full-risks rates. Buyers who are taking a loan to buy a property will be required by lenders to buy flood insurance and will be paying substantially more for flood insurance than the current sellers.

In addition if the property is located in a flood zone, unless provided by the seller, buyer will have to provide the insurance company an elevation certificate to ensure that the premium accurately reflects the flood risk by either a) asking the local floodplain manager if the property’s elevation information is on file and in which case the floodplain manager can issue an elevation certificate or b) hiring a surveyor at a cost of around $750 to conduct a survey and issue the elevation certificate.

A bipartisan bill, the 'Homeowner Flood Insurance Affordability Act' was introduced recently to delay further implementation of some rate increases in Biggert-Waters Act. This will allow the Federal Emergency Management Agency to complete an affordability study that was mandated by Biggert-Waters and propose targeted regulations to address any affordability issues found in the study.

Contact your flood insurance agent for further details.