I think it would be safe to say from my research on flood insurance that the National Flood Insurance Program (NFIP) is bleeding money – the money taken in from premiums is not enough to cover the cost of the losses. For decades, Congress has been voting to subsidize the NFIP to cover the losses, but not anymore. Congress has finally decided it is time the NFIP stands on its own. In order to do just that – like I said in my last blog – there are big changes coming to the NFIP. The changes are designed to stop the bleeding while still providing insurance that will protect flood areas. Some of the changes are:
- Beginning August 1, 2013, FEMA will begin to phase out subsidies to any property that has repetitive loss or whose total flood-related paid claims exceed the fair market value of the property. This will be done by increasing the property’s premium rates by 25% annually until their average risk premium is equal to the average of the risk premiums for actuarially rated policies.
- FEMA will no longer provide a rate subsidy to any property purchased after August 1, 2013 or any policy that has lapsed in coverage; these properties will be immediately subject to full-risk rating.
- Since January 1, 2013, FEMA has begun to phase out subsidies for any home that is a non-primary residence (both new and renewal policies). This will be achieved by increasing premium rates by 25% annually until full rates are achieved.
- August 2014 is the implementation date for premium adjustment for properties in the remapped flood areas.
You may also find it worthwhile to read this linked brochure (http://www.nfipiservice.com/pdf/Storm%20Sandy/BW12%20Tri-Fold%20%28Professional%20Print%29.pdf). It was produced by FEMA to help educate Storm Sandy victims trying to rebuild, but the information on changes in the flood insurance program is useful for all of us.
Wow, there is a flood of information out there about the changes to the NFIP! It’s a lot to take in and understand…so, as always, if you have additional questions about how your policy will be directly affected these changes, contact your insurance agent. We are always here to help!