The National Flood Insurance Program (NFIP) has released the 2015 rate changes which take effect on April 1. On average overall, rates are rising 10%. This is consistent with the 5-10% increases prior to the 2012 Biggert-Waters Act. There is also a new surcharge to pay for recent NFIP legislative reforms. Please note that this change does NOT impact privately purchased flood insurance (example: policy from Llyods of Lindon or other providers) ONLY the National Flood Insurance Program policies. Seller & Buyer Agents: Important information follows if you represent clients in a flood zone!
Last year, Biggert-Waters act was amended for about 20% of policy holders who bought an older property (including second homes) and jumped from a subsidized rate to full cost for flood insurance overnight. The amendments resolve the implementation problems by resetting the rates to pre-Biggert-Waters levels and capping them at 18-25% per year in the future. Please consult an insurance agent for specific properties.
- Non-Residential Business properties (rated as business occupancy), the rates will increase 25% for certain Pre-Firm properties. Not-for-profit businesses will need to identify themselves as not-for-profit to reduce their impact.
- Additionally, any newly mapped properties….properties mapped into a SFHA for the first time, will get preferred rates the first year but after that, rates will increase 15-18% until full risk premium is achieved.
The last important part is the risk of lapsing policies.
- Seller’s Agents: Please tell your clients: For homeowners who let their NFIP policy lapse after Biggert-Waters flood insurance reform, they have up to 90 days to “reinstate” (pay late) their renewal premium and NOT be forced into non-subsidized rates. So, if the policy already lapsed, there is no going back to the subsidized rate. If it is still within the 90 “grace” period , they will want to make sure it gets paid and reinstated before that deadline. If it is already cancelled, the dates and timing are meaningless. They will be full risk rated. Keep in mind that is just for those Pre-Firm policies.
When we offer customers the private insurance, we are now explaining and making them sign off that if they later decide to go back to NFIP, they will lose that “grandfathering/subsidized rate”.
To summarize, until “full risk rate” is determined, disclosed and all possible rate reductions applied, uncertainty still abounds. While education and knowledge are the key, unfortunately being armed with the regulation changes still does not give definitive answers today.
Special thanks to Sharon MacEachern of Greylock Insurance and Doug Goudey of Wheeler & Talyor Insurance for helping us compile the information and ensuring our message is accurate.