Monday, February 20, 2017

Flood Insurance - What You Need To Know

If you have been through a major flood, you know the kind of damage and property loss it can cause. If you haven’t experienced it, it is difficult to image what it is like.

The National Flood Insurance Program (NFIP) was created in 1968 as a means for property owners to protect themselves financially in the event of flood damage. Flood insurance is offered to homeowners, renters and businesses in communities that participate in the program. According to the NFIP flood is the number one natural disaster in the U.S. From 2011 to 2015, the average flood claim was over $46,000. From 2006 to 2015, flood damage insurance claims exceeded $1.9 billion per year. Major changes to the program will come into effect from 1st April this year as continuing with the program with the current subsidized rates is no longer viable, and it is important that homeowners know about them so they can plan for the future.

NFIP Changes

Flood insurance premiums will increase. On an average, this will be about 6.3%. This increase does not include the Homeowner Flood Insurance Affordability Act (HFIAA) surcharge or the Federal Policy Fee (FPF). If the HFIAA surcharge and FPF are taken into account, the total impact on the policy holder will be around 5.4%. There will be no changes to the:

  • Deductible Factors
  • Federal Policy Fee
  • Reserve Fund Assessment
  • HFIAA Surcharge
  • Probation Surcharge
  • Increased Cost of Compliance (ICC) Premiums
  • Tentative & Provisional Rates
  • Mortgage Portfolio Protection Program (MPPP)

The annual premium rate increase is normally limited to 15% but in some cases it may go up to 18%. Additionally, the premiums for following Pre-Flood Insurance Rate Map (Pre-FIRM) subsidized policies will be increased by 25% per year until the rate is at full risk levels:

  • Non-primary residential properties
  • Business properties
  • Severe Repetitive Loss (SRL) properties, which includes cumulatively damage
  • properties
  • Substantially improved properties

In the case of Pre-FIRM Subsidized Policies the following increases will be effective:

  • Primary residences – premiums will increase on average by 5%
  • Non-primary residences – premiums will increase on average by 24%
  • Policies subject to 25% annual increases – premiums will increase on average by 23%
  • All other Pre-FIRM subsidized risks not covered in the first three bullets (primarily

Condominium and multi-family policies) – premiums will increase on average by 8%

How Are You Affected?

The changes that will come into effect are complex and technical. Most home and business owners will have difficulty in understanding the effect these will have on them. Now is the time to contact your insurance broker to know how the changes will affect you and how much you will pay for flood insurance. If you do not have flood coverage, an insurance professional will be able to help you find the policy you need at the cost that is right for you.

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