In Flood the Premiums

The National Flood Insurance Program, or known as NFIP, the FEMA run program that is responsible for providing the funding for flood insurance policies issued throughout the nation, has released new guidelines for flood insurance as of October 1st, 2013. The flood insurance premium rates are going up!

What can you do to lower your costs?

The National Flood Insurance Program has notified the insurance industry that they will be raising their premium rates due to the extensive losses caused by Super Storm Sandy, the flooding in the Midwest, and Hurricane Katrina. Through Biggert Waters Flood Insurance Reform Act of 2012, Congress has required the program to raise insurance premium rates to make the NFIP more financially stable. That statement, issued by FEMA, is a polite way of saying the program that has been funding the insurance claims payments for flood losses since 1974 needs money.

The National Flood Insurance Program is going about stabilizing their finances in two ways.

The first method is to basically increase premiums on personal and commercial flood insurance policies in the range of 10 to 25%. The flood insurance policyholder will see this increase upon renewal. Based on what we, in the insurance industry, have seen, it appears that commercial flood insurance policies will increase by 25%, while personal flood insurance policies will increase on average between 10 and 25%. The increases on the personal flood insurance policies will be determined by loss experience on each individual policy or if the house is a secondary or vacation home.

The National Flood Insurance Program has also redrawn the flood maps used to determine if a home is in a flood zone as well as determine which flood zone a dwelling is located in on the flood plain. FEMA’s research over the last few decades has shown that the actual flood zones are larger than previously estimated in the old maps. Therefore they have extended the zones to include more flood prone area in which homes and businesses reside.

What does the change in zone size on flood maps mean to you the consumer?

For new homebuyers it will mean that they will be required by their banks to obtain flood insurance to protect their new home that was in a location that formally did not require flood insurance. The existing homeowner, the flood map change may mean nothing until the homeowner decides to refinance and get a new mortgage. At that time, the banks will require them to now buy flood insurance.

What can be done to lower premium costs?

Potential ways of lowering flood insurance premium costs include determining if a home does fall within one of the new redrawn flood zones prior to refinancing , obtaining a Elevation Certificate to determine the home’s correct premium rate, higher deductibles, consider incorporating flood mitigation into any home remodeling or rebuilding project and talk with local town officials about community wide mitigation steps.

A current or potential homeowner would be wise to check with their insurance agent and town officials about each of these possible options.