Why has flood Insurance gone up? NOW WHAT? Here’s what to do!

Why has Flood Insurance Gone Up? What to do next? Here’s what to do!

If you live where floods happen, you may already have seen an increase on your flood insurance, and if not, you probably will see it when you get your next bill. Here’s WHY rates are changing, and some things you can do to help you figure out what to do next if your rates have gone up.

Flood Insurance for rental houseFIRST: Why Have Rates Gone Up?

Two reasons:

1. The FEMA Federal Emergency Management Agency is updating its flood maps to be more accurate. This could change your flood risk “designation”. Basically if your risk is higher, your premiums will go up. If it’s lower, your premiums could go down.

2. BUT, the BIG reason…. Last year, a new law took effect that required the National Flood Insurance Program (NFIP) to phase out subsidies for older properties to reflect the full risk of flooding.  They are charging basically going to start charging you what it costs now. 

NFIP needed to pay it’s bills, and in order to do so, it needed to do something…. and getting rid of those entitlements and subsidies (over the next five years) will allow them to stay in business.

Some subsidies have been given in the form of “grandfathering.” A grandfathered rate is a discount given to homes built in compliance with then-existing standards in a flood-mapped community where the flood risk has since increased.

Congress and FEMA are reviewing these properties to determine whether to phase out these grandfathered rates. FEMA won’t make a decision on this until late 2014. By then, Congress could pass a law delaying the increase indefinitely.

Do You Have a Subsidized or Discounted Rate?

Only 20% of NFIP policies are subsidized. Most homeowners already pay the full rate and won’t see an increase.

If your property isn’t your principal residence, is in a special flood hazard area, and was built before the first flood insurance rate map was implemented for your community, you may be getting a subsidy for being what’s called Pre-FIRM (pre-flood-insurance-rate-map).

TIP: Here’s how to find out if your home is Pre-FIRM, You can actually look up your area in the Federal Emergency Management Agency’s (FEMA’s) Community Book.

1. Simply click your state.

2. Look at the column for the date in the “Init FIRM Identified” for your area.

If your home was built before that date (and it’s in a special hazard zone) you probably DO have a subsidized insurance.

If you Don’t Have Premiums that are Subsidized or Discounted

It’s still possible you still could see a change in your flood insurance premiums. If your house is in a community that adopted a revised flood map after July 6, 2012 it’s possible that the revised flood map puts you in a different zone putting you  and your rates in danger of going up (or down).

When Will the Rate Changes Take Effect?

The first adjustment has already happened for many people, if your home is Pre-FIRM and it’s a second home (rental or vacation), you may already have seen your rates change. A 25% increase was implemented for policies renewing after Jan. 1, 2013. Keep in mind that increases will continue each year until they reach full-risk rates.

In October 2013, more subsidized homes will start seeing rate increases of 25% each year:

    • Properties with severe repetitive losses
    • Business properties
    • Properties with previous flood claims where the claim exceed the market value of the property

If you have a Pre-FIRM home (and it’s your primary home) and it doesn’t fall into the category above, (lucky you!) you get to keep your subsidized rate until:

    • You sell your home.
    • You let your policy lapse.
    • You have severe, repeated flood losses.
    • You buy a new policy.

Can You Get a Better Rate?

You may be able to get a lower flood insurance rate by changing your home’s flood risk. Congress appropriated a large sum of money for property owners to raise their homes onto posts, piers, columns, or pilings. You should check with your local community to see if there is any grant money is available to help you do that. You should talk to your insurance agent about how elevating your house can change your flood insurance premium.

This plans that your local community makes has a big impact on your insurance premium. There’s a Community Rating System that can reduce flood insurance rates by up to a whopping 45%. This all depends on which flood plain management regulations your community adopts.

Check with your local officials or insurance company to see if your community participates in the Community Rating System, and if you can get a discount for that. If your community doesn’t participate, write a letter to local officials urging them to join the Community Rating System. It can save you some big money!

Other things you can do to cut down how much you pay for flood insurance:

  • Opt for a higher deductible.
  • Convince local officials to put more money into community flood mitigation projects to lower your flood risk.

It may not lower your premium, but making sure that you have a  flood cleanup kit on hand will make your life easier in the event you actually do have a flood.

The private market has almost NO good deals on flood insurance, so generally NFIP is the best deal. Taking your chances on a virtually nonexistent private market for flood insurance at rates only the wealthy can afford, isn’t a good option,

The government has intervened so long in this sector by pumping money into artificially influencing rates, that the homes in these regions have over-inflated values. The 5 year step back is probably too aggressive given the long standing interference that has gone on, and this 5 year term probably needs to be scaled back to 20 years in order to not “kill” home values in these areas. But, who knows if MPIF can afford such a long term, and remain solvent.

 Common Mistakes Made in Flood Insurance Premiums

It’s possible that the rate you have for your flood insurance is wrong. So, if you disagree about whether your home is in a particular flood zone or the insurer didn’t take into account the pilings that raise your home 15 feet in the air, you need to ASK! But, it’s on you to take the steps necessary to appeal your home’s flood zone determination.

You may need an “elevation certificate” from a surveyor or engineer to show that your property is of a certain elevation above the flood plain, which will aide you in lowering your premium. This will be the proof that your home sits above the predicted flood level.

This goes with any insurance (flood insurance or any type of insurance) if the insurer has any mistakes listed on the policy, you need to correct them. For example, if your policy says your home doesn’t have an elevator and it does, or they have listed that you have a certain type of basement, and you have another, tell your agent, even if your premium will rise when those are included. That ensures your property and possessions are fully covered and recoup what you’re owed.

The last thing that could be wrong, which could have a big effect on your premium is if the FEMA map itself is wrong. You can check with local zoning officials, prior owners, even your builder, and FEMA to see if anyone has filed a Letter of Map Amendment asking for them to review the map.

If no one has filed and appeal you should FILE YOUR OWN MAP REVIEW APPEAL HERE.