The impact of flood insurance changes
The kids are back in school, the Labor Day weekend has passed and the traffic is finally looking a little thin on the island, so why isn’t every homeowner walking around with big smiles on their faces? Two things – hurricane season with its threat of flooding is still here and oh by the way, your flood insurance premium is going up, maybe a lot.
There has been a lot of talk about the Biggert-Waters Flood Insurance Reform act passed in July last year as part of a larger transportation funding bill – some good, but mostly bad. The intention of the bill was to set flood insurance premiums at a level that better reflects the full risk of flooding for the 5.6 million American property owners who currently live in flood prone regions. In order to achieve this, many of the flood insurance premium subsidies that businesses and homeowners have enjoyed are either being reduced or suspended. In addition, the government also is redrawing flood zone maps that will classify more properties as flood risks.
The reason I’m writing again about this bill is because in October subsidized rates are anticipated to be phased out for a variety of properties, moving flood insurance premiums to full risk rates. Some but not all of the properties that will begin to feel the effects of this in October are businesses, newly purchased properties, properties that have had repetitive loss or severe loss, properties at least 30 percent improved and policies that have lapsed. Non-primary residences were due to have the subsidized rates phased out starting in January 2013, so second home owners on Anna Maria have probably already been affected. Finally, late in 2014 the Federal Emergency Management Agency, which administers the flood insurance program, anticipates implementing phase-in of full risk rates for properties affected by map changes.
Since the flood zone maps are being redrawn, according to the Manatee County Website, the new flood zone maps are due to be adopted in March 2014, and there may be homeowners who now find themselves in a flood zone. The Biggert-Waters law unfortunately did away with the grandfather provision that shielded property owners from rate spikes if they built to proper specifications, but later were reclassified because of new flood maps. Although this may not be an issue on Anna Maria, there are other homeowners in Manatee County that will probably be impacted.
The negative influence of this new law is just starting, which is making lawmakers and their constituents take notice. Some members of Congress are asking FEMA to delay implementing the law and/or consider limiting the increases to the insurance premiums. Louisiana’s senators are at the forefront of this effort since their state is likely to be impacted more than even Florida with the redrawing of the federal flood zone maps.
There is a good part of the bill which is the reauthorization of the National Flood Insurance Program through September of 2017. Properties that carry a mortgage and are in a flood zone are required to be covered by flood insurance as a contingency of financing. Therefore, by extending the National Flood Insurance program till 2017, it guarantees that sales transactions for properties in flood zones will not be delayed waiting for the annual authorization of this program, which had been done in the past.
If you want to live on an island, you have to pay the price, and that price will be going up. At least the number of hurricanes predicted for this season has been reduced and you can drive off the Island faster. Be happy for the little things.
