Federal officials are encouraging homeowners in flood-prone communities to consider elevating their homes and increasing their deductibles to cut down on the sticker shock from rising flood insurance premiums.
Congress approved legislation last year designed to put the National Flood Insurance Program on firmer financial footing. The legislation gradually eliminates government-subsidized premiums for more than 1 million properties in flood-prone communities.
The insurance premiums for vacation and rental homes in the program increased 25 percent on Jan. 1. Those premiums will continue to go up each year until rates reach the level that the Federal Emergency Management Agency considers sufficient to cover flood claims and administrative costs for a flood in that particular community.
Properties that have suffered repeated losses or substantial damage over the years will also see a gradual 25 percent rate increase, beginning Oct. 1.
Meanwhile, in July, new property owners as well as owners who let their policies lapse will no longer be able to buy government-subsidized insurance.
They’ll still need flood insurance, though. Some property owners may let their policies lapse as a result of the higher premiums, but mortgage companies are likely to come back to the owner and require flood insurance regardless. That will mean buying another policy that will cost as much, if not more, than what they would pay through the National Flood Insurance Program, said Edward Connor, a FEMA deputy associate administrator.
Those who don’t have a mortgage and decide to drop coverage are “rolling the dice,” Connor said. They still might be eligible for some assistance in the event of a disaster, but it would likely not come anywhere close to offsetting the damages.
Congress created the flood insurance program in 1968 because few private insurers covered flood damage, leaving the federal government to cover the cost of disasters. Many of those covered by the program live where flood insurance is mandatory for those with mortgages from federally regulated lenders. The program was $18 billion in debt when Congress took action.
“Our concern is that we get the word out to folks so they’re not surprised,” Connor said Friday in a conference call with reporters.
Connor encouraged property owners to work with their insurance agent to obtain an elevation certificate, which will verify the properties distance from the ground. He said that increasing the elevation of a property by a foot can save hundreds of dollars per year in insurance costs.
He also said local communities can take steps to mitigate flood damage that could lead to discounts for property owners. Such steps typically include increasing the elevation of certain flood-prone properties or relocating them.
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