Flood insurance along the gulf coast is going to sky rocket in the near future. The National Flood Insurance Program (NFIP) supported by FEMA is 24 billion (with a B) in debt and doesn’t have a reserve.
Last July in 2012, our congressmen cut a deal with FEMA that if they would extend the NFIP they would allow them to go up on the rates in order to cover the amounts they were subsidizing in this program.
The National Flood Insurance Program will start to phase out some of its premium subsidies on Oct. 1, causing rates to increase for some property owners in areas affected by flooding. Some rates are already higher. Here’s what you need to know:
Why is this happening? When the NFIP was set up and flood-insurance rate maps were created, some older properties were grandfathered in and given subsidies to help defray the expense of costly flood insurance. Now that the grandfather provisions are due to phase out later this year, the owners of those properties will be required to pay unsubsidized flood-insurance rates.
What properties will be affected? The phaseout and subsequent rate increases will likely affect non-primary residences, business properties, multifamily units, and properties with repeated flood losses.
Which properties will not be affected? A property owner’s primary home is not likely to be affected by the rate increases unless the owner’s insurance policy lapses, the property suffers a severe repeated loss due to flooding, or it’s sold to a new owner. We understand there will still be a gradual increase.
How can Texas REALTORS® help consumers? The National Association of REALTORS® recommends three ways we can help consumers who live in or are buying an impacted property:
- Determine if their community participates in the NFIP community-rating system
- Find out if they’re eligible for a federal elevation grant to raise the property
- Suggest that the owners look into lowering their insurance premiums with a higher deductible
Visit Realtor.org to learn how NAR is working with legislators to address the NFIP changes.
Check out this article from Realtor Magazine concerning Flood Insurance: