Last year the National Flood Insurance Program was reauthorized. One aspect of this reauthorization was a requirement that the program become essentially self-sufficient by 2017. This requirement creates a number of changes to what people will pay for flood insurance. Over the next several posts, I will try to explain these changes.
Higher Insurance Premiums for Buildings Constructed Below the Base Flood Elevation
Essentially this change phases out lower rates for properties constructed prior to the property being designated as being within a flood zone. In the past, properties constructed to existing codes were provided a discounted insurance rate. This discount applied whether the insurance was acquired when the property was first identified as in a flood zone, or upon a mortgaged resale. Properties that acquired flood insurance prior to being placed into a flood zone, were provided deeper discounts than those that acquired insurance later.
Biggert-Waters changes this. Properties being added to the flood zone for the first time will not enjoy these protections. These properties will be required to pay actual insurance costs (I am still trying to determine the impact of this act on non-flood zone properties that acquired flood insurance prior to July 2012 to see if they will enjoy any rate shock protection).
First time flood insured properties will face significant flood insurance rates as will properties that voluntarily let their insurance lapse. Resale of insured properties will also face rate increases as lower rate policies are no longer transferable.
Bottom line, and I will find myself repeating this over and over, these changes will mean large increases. I have read about $10,000 increases for velocity zone and $4,000 increases for ?A? Zone (1% chance) properties.
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