Many homeowners have preconceived notions about what flood insurance covers and who needs it. Below are the top five reasons people resist buying flood…and five reasons to make sure your home is covered adequately. Flood Insurance Barriers
1. I already have homeowners insurance. Many people mistakenly believe that flood damage will be covered by their homeowner’s policy. Only flood insurance covers the damages caused by floods.
2. I live on a hill and am not at risk. Those who live on a hill or in an area that has never been flooded do have reduced flood risk, but flooding can happen anywhere, anytime. Aside from major storms, flooding can be caused by heavy rains, melting snow, inadequate or clogged drainage systems, or failed protective devices such as levees or dams. Even if you live in an area of reduced risk, it doesn’t mean the risk is eliminated.
3. I cannot purchase flood insurance because I live in a floodplain. Whether you are in a high-risk or low-risk area, as long as your community participates in the National Flood Insurance Program, you are eligible to purchase flood insurance.
4. I have already experienced a floodit will not happen again in my lifetime. The phrase “100-year flood” can be misleading. Many may think that this means a flood only happens once every 100 years, but actually this refers to the flood elevation that has a 1 percent chance of being equaled or exceeded each year. A “100-year flood” could occur more than once in a relatively short period of time.
5. I do not live in a flood zone. Everyone lives in a flood zone; it is just a question of whether you live in a moderate-to-low or high risk area. Over 20 percent of NFIP claims are filed from people outside of high risk areas and receive one-third of disaster assistance for flooding.
MAJOR CHANGES TO NATIONAL FLOOD INSURANCE PROGRAM
Below is additional information from last week’s briefing about new legislation that may affect flood insurance policy rates for home and business owners in your community.
The Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12) requires FEMA to take immediate steps to eliminate a variety of existing flood insurance subsidies and calls for a number of changes in how the program operates. The new rates will reflect the full flood risk of an insured building, and some insurance subsidies and discounts will be phased out and eventually eliminated. Rates on almost all buildings that are, or will be, in Special Flood Hazard Areas (SFHAs) will be revised over time to reflect full flood risks. Based on various conditions set forth in the law, subsidies and grandfathered rates will be eliminated for most properties in the future.
Effective on January 1, 2013, flood insurance policy rates for some older non-primary residences in SFHAs that received subsidized rates based on their “pre-Flood Insurance Rate Map” (pre-FIRM) status will increase by 25 percent a year until they reflect the full-risk rate. A pre-FIRM building is one that was built before the community’s first flood map became effective (1974) and has not been substantially damaged or improved. If the building will be lived in for less than 80 percent of the policy year, it is considered to be a non-primary residence. Click https://bsa.nfipstat.fema.gov/wyobull/2012/w-12043.pdf to read a National Flood Insurance Program (NFIP) bulletin that provides additional details around the legislation.
Effective August 1, 2013, the NFIP will also begin eliminating subsidized premiums for other buildings as mandated by Section 100205 of BW-12. Click www.nfipiservice.com/Stakeholder/pdf/bulletin/w-12109.pdf to read the full bulletin and note that key changes include:
Subsidies will be phased out for severe repetitive loss properties consisting of 1-4 residences, business properties, and properties that have incurred flood-related damages where claims payments exceed the fair market value of the property.
Properties with subsidized rates will move directly to full-risk rates after a sale of the property or after the policy has lapsed.
NEW policies will be issued at full-risk rates.
Policyholders should be aware that allowing a policy to lapse could be costly. A new application will be required and full-risk rates will take effect.
Beginning in 2014, premium rates for other properties, including non-subsidized properties, will increase as new or revised flood insurance rate maps become effective and full risk rates are phased in for these properties. These premium rate increases will include properties in areas that have received new or revised flood insurance rate maps since July 6, 2012 (the date of enactment Changes in the Flood Insurance Program Preliminary Considerations for Rebuilding – Early Considerations for Rebuilding of the new law).
Additionally, even if you build to minimum standards today, you will be subject to significant rate increases upon remapping if your flood risk changes in the future.
Important Note on Preferred Risk Policies (PRPs)
As of January 1, 2013, PRPs issued on properties located in a high-risk area may continue beyond the previously designated two-year period until FEMA completes analysis and implements a revised premium structure put in place with BW-12.
For some policyholders in areas flooded by Sandy, the impact of these changes could be substantial. For this reason, the Federal Emergency Management Agency (FEMA) encourages property owners to consider flood insurance costs when making decisions about how high to rebuild. A brochure that details some of the legislation’s impacts on building is also available www.fema.gov/library/viewRecord.do?fromSearch=fromsearch&id=6712. Scroll down and click on the download/print link.
For More Information:
For the latest NFIP Bulletins about the implementation of these changes, visit www.nfipiservice.com/nfip_docs.html. For more details about flood insurance, visit https://www.floodsmart.gov/floodsmart/.