All buyers of older properties (“pre-FIRM”) will see a premium rate reduction under the Homeowner Flood Insurance Affordability Act of 2014.
Instead of jumping to “full cost” for flood insurance, buyers will assume the seller’s Oct-2013 rate for a pre-FIRM property.
FEMA also extended the rate relief so all pre-FIRM properties (including second homes and businesses) will begin paying Oct-2013 rates when they purchase or renew their flood insurance after 2014
- ALL buyers of a pre-FIRM property, not just those whose seller has an existing policy;
- ALL recent owners who apply for a new flood insurance policy on a pre-FIRM property;
- ALL recent owners who reinstate an old pre-FIRM policy that previously lapsed for any reason;
- ALL recent owners who renew a policy on a pre-FIRM property bought or newly insured after the 2012 Biggert-Waters law.
While expediting the rate relief, FEMA must still issue refunds to all those who paid more than their Oct-2013 rate. FEMA has updated THE manual which insurance companies use to write flood insurance policies. The comprehensive manual provides answers regarding flood insurance.
Download the FEMA manual at http://www.fema.gov/media-library/assets/documents/97901The National Flood Insurance Program (NFIP) Flood Insurance Manual is used primarily by insurers and agents selling and servicing Federal flood insurance.
Why was it critical for Congress to pass the 2012 Biggert-Waters National Flood Insurance Reforms?
- Provided 5 years of certainty from NFIP shutdowns and extensions that had cost 40,000 home sales a month. Home owners can rest assure that flood insurance will be available at the closing table.
- Maintained NFIP coverage so no one takes their chances in a private market that cherry picks million-dollar property owners. Flood insurance is accessible to all homeowners and businesses.
- Gradually phased-out subsidized flood insurance that had painted a giant budget “bull’s eye” on NFIP. The program will borrow less from taxpayers to make up for undercharging old properties.
- $24 billion – The amount NFIP had to borrow to cover claims after Hurricane Katrina. Biggert-Waters pays back $5 billion and keeps the program from going broke in the long run.
Do the flood insurance amendments apply to second homes and commercial properties?
- Yes. The amendments will slow the highest rate increases under Biggert-Waters for the vast majority of second homes and commercial properties.
- While some may not see a “rate reduction,” everyone will gain new options to help moderate the impact and transition: they can sell, assume, grandfather, mitigate, or appeal under these amendments.
- Before, theBiggert-Waters law was:
- Impacting property values; each $500 premium rise meant a $10,000 loss in value according to the RAND institute; and
- Picking winners and losers not only among the property owners if they tried to sell but also among the communities where these properties are concentrated.
- The problem was owners of second homes and commercial propertieswere stuck:
- Could not sell the property because buyers were either balking at flood insurance increases above 25% per year or worried that it might one day lose its “grandfathered” status.
- Could not elevate the property (due to the cost or nature of construction), appeal the flood insurance rate map, raise deductibles further, or find anyone at FEMA to advocate on their behalf with insurance companies that were providing wildly inaccurate rates and quotes.