There are big changes coming in the costs of flood insurance, particularly for individuals living in Special Flood Hazard Areas (SFHA). These are typically in the “A” and “V” Zones in which federally backed mortgage lenders require their borrowers to carry flood insurance.
Until now some of these rates have been subsidized by FEMA, particularly for homes that were built PREFIRM, meaning they were constructed prior to the implementation of the current flood maps. Due to events like Superstorm Sandy, FEMA is in the process of eliminating these subsidized rates. The Biggert Waters Reform Act of 2012 which started to be phased in as of January 1, 2013, will eliminate these subsidies. Some of these changes will take place quite abruptly and others are phased in over a period of time.
The policyholders that will be affected by this change include the following:
- As of January 1, 2013 there will no longer be a PREFIRM rate for secondary homes (meaning rentals and vacation homes) These policy holders will pay the actual rates and will no longer receive subsidies.
- As of October 1, 2013, new policy holders (for instance individuals purchasing a new primary home) will no longer receive PREFIRM rates/subsidies. These individuals will be required to obtain elevation certificates in order for FEMA to ascertain their true risk and subsequent rates.
- October 1, 2014- Existing Policy holders will experience rate increases of 20-25% annually until such time as they reach their true rate. These policyholders will also be required to obtain an elevation certificate to determine their true risks.
There will be other changes that affect policy holders so it is important that when dealing with flood insurance you speak with an agent that is familiar with how these new regulations will impact your costs and thereby potentially impact the sale-ability of your property. There are instances where an informed insurance adviser can work with you to make your property compliant and significantly mitigate your risks as well as the costs of your mandatory policy.
At COMPARITY we can help you navigate these treacherous waters. Simply call us at 1-855-268-3733 or email me at email@example.com