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Flood Insurance Rates to Skyrocket

FEMA Insurance Rates affected by Biggert-Waters Act of 2012

In our last post we explored ways to save on flood insurance, which is a major expense for anyone who owns property in a flood zone. But in the past few days news reports have indicated that the rates will soon skyrocket far beyond what anyone had imagined. It appears that Congress has now decided that the National Flood Insurance Program (NFIP) must gradually begin to pay for itself, rather than continue in its current state of subsidization.

An example of how National Flood Insurance Program rates may increase when the Biggert-Waters Flood Insurance Reform and Modernization Act of 2012 is implemented. National Flood Insurance Program

This is very ominous news for anyone with property inside a designated flood zone. As a result of the Biggert-Waters Flood Insurance Reform and Modernization Act of July 2012, insurance rates will increase in large jumps over the next four years until the program begins to break even.

The Biggert-Waters Act, although it will bring huge spikes in flood insurance rates, will also ensure that the insurance will be continuously available with no stoppages, at least through the year 2017. Until now, the NFIP has been funded in a haphazard way, with several gaps in funding that halted construction of tens of thousands of building projects.

The survival of the NFIP is now assured for the next four years, which is a relief to those living in flood zones. Without the NFIP coverage, these home and business owners would not be able to buy insurance from any private company — the properties would be completely unprotected. In many flood-prone areas across the US, flood insurance is federally mandated in order to use the property, so losing the NFIP coverage would be tantamount to losing the property altogether.

The Biggert-Waters Act also mandated the improved accuracy of flood zone maps, and these new maps are being released now. As a result, tens of thousands of property owners are finding that they will soon be required to carry flood insurance for the first time. Other properties that have been flooded and rebuilt in the past will be straddled with exorbitantly high insurance rates that reflect the risky location of the property. No longer will these flood-prone properties enjoy federally subsidized flood insurance, but will have to “pull their own weight” as a risky insurance gamble.

Although the Biggert-Waters Act provides recourse for challenging the new floodplain maps and for appealing the decision to include a property inside the flood zone, most of these property owners will find that expensive flood insurance will soon be an onerous expense that they must find a way to live with. In desperation, many will begin to make improvements to their infrastructure that will protect the property and help to lower astronomically high insurance rates.

Soon, flood protection measures that in the past were deemed too expensive or difficult will become simply prudent and cost-effective. Flood panels, earthen berms, run-off control projects, and other flood protection measures will increasingly be an integral part of every new construction, and owners of existing properties will by necessity begin the retrofit process to include these features.


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