Fear and Frustration About Flood Insurance Rate Hikes
Floods are the most common, and most costly, natural disaster. Superstorm Sandy cost an estimated $65 billion in property damage. Hurricane Katrina cost $108 billion in damages. 60% of all declared disasters in the past several years involved flooding.
Every home carries a potential risk for flooding. Even a small amount of water in your home can cause major damage. Almost 20% of flood insurance claims come from moderate-to-low-risk areas. Flooding can occur from poor drainage systems, rapid accumulation of rainfall, flood after fire, melting snow, and broken water mains.
Approximately 5.5 million people currently hold flood insurance policies in more than 21,800 US communities. Changes to the federal flood insurance program, the National Flood Insurance Program (NFIP), threaten to raise premiums by redrawing flood zone maps and eliminating subsidies.
The controversial premium hikes are due to the implementation of The Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12). Administered by The Federal Emergency Management Agency (FEMA), BW-12 requires the National Flood Insurance Program (NFIP) to raise rates reflecting true flood risk, making the program more financially stable, and change how the Flood Insurance Rate Map (FIRM) affects policyholders.
What does this mean for individuals?
Flood insurance premiums will jump by thousands or even tens of thousands of dollars a year for some home and business owners. Rate hikes will hit hardest in places like the Gulf Coast, the New Jersey shore, and Florida.
What does this mean for the housing recovery?
According to the Insurance Journal, affected regions could see a decrease in home sales. Benefits extended to current homeowners can’t be passed along to prospective buyers. Premium rate hikes could also lead to another foreclosure crisis in chronic flood zones.
How are REALTORS® involved?
The National Association of REALTORS®, NAR, testified on November 19, 2013, before the US House Financial Services Subcommittee on Housing and Insurance. NAR supports the Homeowner Flood Insurance Affordability Act which would delay major rate changes until FEMA reports to Congress with affordability solutions.
What can we do?
Support NAR and delay the changes to the NFIP by writing to your Member of Congress and Senators. Congress has legislation in the House, H.R. 3370 and Senate, S. 1610, to delay changes to the NFIP.
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