Across the country, homeowners who live in coastal areas or along rivers are seeing huge hikes in the cost of flood insurance. The ballooning rates are due to a provision that went into effect in October — called the Biggert-Waters Insurance Reform Act of 2012 — and revisions made to government flood maps.
Biggert-Waters phases out government subsidies which used to be provided on older homes, and the new Flood Insurance Rate Map (FIRM) reassesses properties once considered lower-risk.
According to the National Flood insurance Program (NIFP) website, “Many of the pre-FIRM properties in high-risk areas do not meet current standards for construction and elevation, and they have been receiving subsidized rates that do not reflect their actual risk.” The rates are scheduled to increase annually over the next five years.
The result of the changes is to force millions of homeowners across the nation to buy flood insurance policies for the first time or to pay substantially higher, and, in some cases, exorbitant insurance premiums on policies taken out before the reforms.
The Pittsburgh Post-Gazette reported one homeowner’s premium in Bridgeville, PA, near Pittsburgh, paid around $1,300 for flood insurance last year. The paper reported the resident, Thomas Drucis, would have to pay around $13,000 annually in premiums for comparable coverage as of this year.
CNN reported on a resident of Hingam, MA, Otto Harling, who never needed flood insurance in the past. But, today, if he decided he needed this extra protection, he’ll pay as much as $10,000 for a flood insurance policy, in addition to his homeowner’s insurance. In Hingam, 40 properties are now in high-risk flood zones after the maps were updated, compared to only seven previously considered high-risk.
Rate hikes like these are occurring all over the country, and the dramatic increases have prompted a response from the U.S. Senate. Recently, the Homeowner Flood Insurance Affordability Act was introduced by Sen. Bob Menendez (D-NJ) and is co-sponsored by Sen. Chuck Schumer (D-NY), Senator Mary Landrieu (D-LA), Sen. Johnny Isakson (R-GA) and 24 other senators. The act repeals part of the Biggert-Waters Flood Insurance Program and delays its implementation for four years. It also requires FEMA to conduct a study on the affordability of rate increases designed to shift the cost of the subsidies to homeowners.
“In my home state people who were paying $800 or $1,000 are now talking about paying $10,000. That’s simply unsustainable,” Menendez said.
Senator Schumer offered a similar perspective. “Residents are still recovering from the destructive force of Superstorm Sandy, and they should not be forced to pay unaffordable premiums as they attempt to rebuild—especially because FEMA has not come close to completing the required affordability study,” Schumer stated in a press release. “We cannot in good conscience raise flood insurance rates before we determine how homeowners can afford to pay them, which is why I look forward to voting later this month to prevent the most devastating rate hikes from taking effect.”
Senator Tim Scott (R-SC) concurred by stating, “A temporary delay will allow for a halt in burdensome rate increases while the problem is addressed.”
Scott’s fellow Senator Lindsay Graham (R-SC) echoed Menendez’s comments. “We need to ensure that the National Flood Insurance Program is affordable, accessible and sustainable,” he said.
While those who own their homes free and clear without a mortgage or home equity loan attached to it can simply not buy insurance and live with the risk, mortgage lenders require mortgagees to hold insurance against property damage.