Drastic Change to Flood Insurance

The Biggert Waters Flood Insurance Reform Act of 2012, unless changed, will bring an end to all our lovely riverside communities that are subject to flooding.  In the past several years the climate has changed, flooding has become more wide spread and hurricanes Katrina and Sandy have combined to leave the National Flood Insurance Program Billions in debt.   Last year Congress, knowing that the red ink had to stop, passed the Biggert Waters Flood Insurance Reform Act.  What they told us sounded reasonable, flood insurance rates would have to go up and the government would no longer help pay the rates for second homes.  Now FEMA has released the regulations and insurance rates that will go into effect on October 1, 2013.

For existing flood insurance clients in special hazard zones (Zones that start with an “A”) the rates for owner-occupied homes will increase about 10% per year and all other policies will increase 25% per year until they hit the new actual rates.  To determine the new actual rates policyholders will have to pay to have an Elevation Certificate done by a licensed surveyor or engineer.  It will be this Elevation Certificate that will show where the first floor (the basement) sits in relation to the Base Flood Elevation.  In our town of Milton, the Base Flood Elevation is the same as the 1972 flood level.

For every new policy after 10/1/13 (or a late payment and lapsed policy rewrite) policyholders will have to have to pay for an elevation certificate (normally in the $300-$700 range depending on how close a benchmark is) and the new actual rates.  Also, anyone who started a new policy after 7/6/12 will have to get an elevation certificate and pay the new rates when their policy renews the first time.

For policyholders that are in flood zones B, C or X (low hazard areas) they will see small and reasonable increases in their premiums and in most cases will still qualify for a “Preferred Risk Policy”.

But policyholders in the A Zones, the high risk areas where the homes and building often have basements that are 15 or more feet below the Base Flood Elevation (BFE) will see large rate increases until they get a flood elevation certificate and lock in the following new rates:

Each of these quotes are for $100,000 coverage on the building/house and $20,000 on the contents with a $2,000 deductible which applies separately to the building and contents:

1 Family Dwelling:

With current subsidized rates:  $1,063.

New rates with an elevation certificate showing the basement at 15 feet below the 100 year flood level BFE:  $12,936!

Non-Residential Building:

With current subsidized rates: $1,123.

New rates with an elevation certificate showing the basement at 15 feet below the 100 year flood level BFE: 17,782!

Tenants in these buildings have to pay rates on their contents based on the basement floor too even if they only rent the 2nd floor of the building!

Homeowners will have to consider moving all their utilities, heat & water systems to their 2nd floors and literally fill in their basements so that their main floor becomes their “first” floor.  If by doing that the first floor is only 6 feet below the BFE the new rates will be $2,675 –  still a lot more than they are paying now but at least something reasonable.

Our only hope is to convince Congress to amend the Act to allow for some sort of long-term subsidized rates for homes and buildings built before the days of flood insurance.  If we can’t, things are going to get ugly fast in “River Towns USA”.

We urge everyone with a property in a Special Flood Hazard Area to call your flood insurance agent to discuss your options.

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