The Federal Emergency Management Agency (FEMA) made important changes to the National Flood Insurance Program (NFIP). These changes are the result of continued implementation of the Homeowner Flood Insurance Affordability Act of 2014 (HFIAA) and the Biggert-Waters Flood Insurance Reform Act of 2012 (BW12). Highlights of the changes include the following and apply to new insurance policies and renewals effective on or after April 1, 2016:
Beginning April 1, 2016, the total average premium increase for all NFIP policies will be 9%. The actual increase for an individual policy may be higher, based on the specific underwriting criteria.
The largest increases will be felt by Pre-FIRM homeowners (homes built prior to 1974 in the City of Naples and 1979 in Collier County), as well as those properties newly mapped from Zone X to an A Zone.
Buyers looking to obtain coverage on a home that once was in Zone X will no longer be eligible for the Preferred Policy Extension. These homes will be rated using an elevation certificate. This change may amount to a premium increase of hundreds of dollars per year. Affected property owners may want to explore obtaining a Letter of Map Amendment (LOMA). If the home qualifies, NFIP will place the property back in Zone X.
Owners of older homes (Pre-FIRM) will lose the subsidized rates if they allow their policy to lapse more than 90 days. Remember those five-figure premiums we were seeing after BW12?
Have a question about Flood Insurance? Let Gulfshore Insurance be your resource.
Will every home in Florida be affected by BW-12?
No, all newer (post-firm) homes and primary pre-firm homes with coverage already in effect will not be affected by the changes. They will, however, be subject to any rate increase FEMA decides to make across the board.
The groups that are most affected are Pre-Firm* homes where 1st floor elevation is below Base Flood Elevation and the policy is for:
- New buyers of flood insurance (higher rates effective immediately)
- Current flood insurance policies on non-primary homes (rates go up 25% per year until they reach the non-subsidized (full risk) premium)
- Any home that was purchased after 7/06/12 would be subject to the full rate at the renewal anniversary date of the policy
Do you need a new Elevation Certificate for an affected home?
Not necessarily, however we recommend it. If there is an old Flood Elevation Certificate we can use that to obtain a rate, but the information may not be accurate in some cases. If the homeowner does not have one, you can check with the community’s Flood Plain Management Department, it is possible they may have one on file. *For all new real estate transactions, we recommend that you encourage either the seller or buyer to obtain a “new” elevation certificate for obtaining accurate flood quotes.
How long will it take to know what Flood Insurance will cost on a Pre-Firm home?
As soon as we receive the Elevation Certificate and photos of the home, we will submit them via email to our Flood Insurance carriers. Previously, the rating process took roughly 24 hours, but because the carriers are back logged with so many requests, it could be days or weeks until we receive an answer back. Our suggestion is to confirm immediately if the home will fall into this scenario and get the information to an insurance agent as soon as possible. Many times you are working within a tight time frame of a contract contingency and we want you to have the flood rate sooner rather than later.
What about homes that were located in Zone X, C, or D and changed to Zone AH? Isn’t the 2-year extension going to expire soon?
Those properties are insured with a Preferred Risk Policy Extension. FEMA removed the 2-year maximum extension time frame as of last January. However, BW-12 will implement an increase in premium for “extension” qualified homes. Premiums for these homes will cost more than a home that is located in Zone X, C, or D. We recommend affected homeowners obtain an Elevation Certificate as their home could be at a high enough elevation to warrant writing a Standard Flood Policy rather than continuing with the extension policy which is subject to rate increases.
What steps should I take when listing a Pre-Firm home or when my buyer is considering buying one?
- Determine the actual Flood Zone (online, ask an insurance agent to run it for you, or call the community’s Flood Plain Management Department).
- If the home is located in Zones AE or VE you will need a Flood Elevation Certificate. Find out if the seller has one or if one is on file with the City/County, etc. Otherwise, order one through a Land Surveyor at a typical cost of $150.
- Request a quote for Flood Insurance through an Insurance Agent.
We have attached our compiled list of Land Surveyors in the area. This list does not represent every Land Surveyor, and should be used as a source of reference.
Here are some helpful resources:
*Pre-Firm Homes are defined as those homes permitted before:
Collier County’s website to check flood zones (not always accurate):
Biggert-Waters 2012 is a comprehensive piece of legislation affecting the National Flood Insurance Program. The biggest piece of legislation included in this reform act is that the NFIP’s authority has been extended until 2017. As the law is implemented, some of the changes have already occurred, and others will be implemented in the coming months. Key provisions of the legislation will require the NFIP to raise rates to reflect true flood risk, make the program more financially stable, and change how Flood Insurance Rate Map (FIRM) updates impact policyholders. It is important to remember that there will be many changes to the program in the coming months and even years. These changes will make it vitally important to stay informed.
- Approximately 5.5 million flood insurance policies are provided through the National Flood Insurance Program and administered by the Federal Emergency Management Agency (FEMA).
- FEMA sets pricing for NFIP flood insurance policies. This means premiums and rates are identical regardless of agent or insurance carrier.
- Premiums for many properties have been subsidized since the program’s inception.
- Since 1978, the NFIP has paid out over $40 billion dollars in claims.
WHAT IS CHANGING?
- The intent of the NFIP was for the program to be self-supporting, meaning premiums would cover the amount of claims paid and administrative costs.
- However, substantial claims associated with recent flooding events such as Superstorm Sandy and Hurricanes Katrina and Ike required the NFIP to borrow additional funds from the U.S. Treasury, resulting in billions of dollars of debt for the NFIP.
- The primary goal of the Biggert-Waters Flood Insurance Reform Act is to make the NFIP more financially sound.
WHAT DOES THIS MEAN FOR THOSE AFFECTED?
- Subsidized rates are being phased out. If your property’s flood insurance rate is considered subsidized, you will more than likely have a new premium.
Gulfshore Insurance has gathered together FAQs, fact sheets, and other resources that detail the impact the Act and the NFIP reforms may have:
FEMA Fact Sheet: Impact of NFIP Changes
Homeowners Guide to Elevation Certificates
Biggert-Waters Flood Insurance Reform Act of 2012: Questions and Answers
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