The National Flood Insurance Program has been around for quite some time.  Recently, however, with storms coming in stronger each year, there have been an increasing number of homeowners putting in claims from these disasters.  Since not all of the homeowners that put in claims had flood insurance, this put a burden on taxpayers’ money to create federal assistance programs to help fix the damaged homes.

The National Flood Insurance Program was originally passed by Congress in 1968.  This program makes flood insurance accessible to homeowners, renters, and business owners in areas where the program was adopted—New York City being one of them.  With the National Flood Insurance Program adopted, it helped many looking for flood insurance to be able to buy it through private insurance companies, since many did not and still do not offer flood insurance.  Aside from having a clear mind if a flood comes, flood insurance is also needed to be able to obtain a mortgage in some areas and instances.

In 2008, the National Flood Insurance Program was running low on funding.  Between 2008 and 2012, Congress had to extend the program to keep it running, but it lapsed a few times in 2010, hurting the housing market in a way.  By July of 2012, Congress had passed a reform act for the program to extend it for five more years.  This was the Biggert-Waters Flood Insurance Reform Act.

The Biggert-Waters Flood Insurance Reform Act was not just for an extension of the funding, but also required many changes to the program.  The changes that are being made to the program affect the flood insurance rate, flood hazard maps, grants for funding, and management of the floodplains.

If you weren’t aware, not everyone has to buy flood insurance, though it is recommended.  Home in high-risk flood areas that have or are getting a mortgage through a federally-regulated or insured lender must buy flood insurance.  The Federal Emergency Management Agency conducts studies and surveys to find out which areas are at high risk and which aren’t.  Areas that are close to the water and are affected by storm surges or flooding are considered to be at high-risk.  To be a little clearer, according to Federal Emergency Management Agency, areas that have a 1% or more chance of flooding in a year are considered to be at high-risk.  Homes in areas considered to be at moderate-to-low risk do not need to buy flood insurance, though it is recommended, since there is no telling of how hard a storm will hit.

As the weather keeps changing, land by water is being eroded and is changing.  This causes the Federal Emergency Management Agency to update their floodplain maps to see who is now in a high-risk area, quite like how New York City had to update their evacuation zone maps after Hurricane Sandy, since water surged in further than expected.  In May of 2013, the Federal Emergency Management Agency began updating their flood zone maps under the Map Modernization Initiative.  Depending on their new survey, your home’s flood risk area might change, causing your flood insurance rate to change or requiring you to purchase flood insurance now.

Flood insurance rates are not like mortgage rates; they do not change from company to company, but are more fixed.  The rate for flood insurance depends on many different aspects, such as when the house was built, the type of house, and the level of risk for a flood in that area.

One of the flood insurance rate changes is that the federally-subsidized insurance premiums are no longer being offered for homes that have been newly purchased, and they are being phased out for secondary homes, homes that have been damaged repetitively, and businesses.  Those who fall under this category will have an increase of 25% in their premiums each year until they are at the full-risk premium level.  This change began in January of 2013 for those homeowners who have subsidized rates on non-primary residences, and it started in October of 2013 for the homes damaged repeatedly and for businesses.

For those who already pay full-risk premiums, there will be a slight change in your rate, but not a big one, unless the flood map changes drastically for the area in which your home is located.  This will consist of an extra 5% assessment fee to start off, and it will increase over time to cover the Reserve Fund assessment.

Another change will be for the homes that were built before the area was a part of the flood insurance rate map, if no changes had been made to those homes to remove the risk of damage.  These homes will have the highest rate increases to their flood insurance premiums.  For the homes being used as primary residences which are under a subsidized rate, due to being maintained under the previous standards, their rates will be grandfathered until the property is sold, the policy lapses, the property has been repeatedly damaged by foods, or a new flood insurance policy is bought.  The grandfathered rates will continue until there are changes in the flood maps for the area in which the house is located.  For those who had homes before the newly-mapped high-risk areas, full-risk rates will begin to be phased in over a five-year term, starting in mid-to-late 2014.  These homeowners will pay 20% more each year over those five years, until the full-risk rate is reached.

To see what flood maps have been changed already, you can visit and search by using your zip code.  You can also use this website to see your property’s flood risk, estimate premiums for your property, and help find a flood insurance agent.  If you would prefer to speak with someone over the phone, you can call Flood Smart at (888) 379-9531.

Posted by Anthony Licciardello on


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