Tides aren’t the only things that are rising nowadays – if you haven’t already, you may soon see an increase in your flood insurance premium. This is thanks to a new act passed through congress last July – the Biggert-Waters Flood Insurance Reform Act.
This piece of legislation was passed in an effort to recoup the losses of the National Flood Insurance Program due predominantly to Hurricane Katrina, which devastated the Gulf Coast back in 2005.
As you can imagine, the reform act document is rather lengthy, and its verbiage is unarguably hard to follow. In an effort to save you some sanity, here is a summary of the two key points of the act that may affect you and your flood insurance:
Loss of Subsidies
In the Flood Insurance Reform Act, certain types of buildings lost subsidies that have been in place since the 1970s. This change has the possibility to significantly raise rates on certain varieties of property, which include:
- Residences that are not classified as a primary residence. This includes second homes, vacation homes, investment properties, and more.
- Any and all business properties.
- Properties that have suffered severe repetitive losses due to flooding.
- Buildings that require a new flood insurance policy (including both new and pre-existing buildings).
In addition to these properties losing their subsidies, this Act has increased the maximum annual rate increase of flood insurance policies from 10% to 20%.
New Standards for Existing Properties
Another major change that the Flood Insurance Reform Act has initiated has the potential to greatly affect older properties.
When a building is erected, it is built following the existing flood maps and flood specifications, and its flood insurance was always calculated based on the flood maps drawn the year the building was constructed. As flood standards changed over the years, older buildings weren’t penalized. This is all about to change.
According to the new legislation, all buildings will be evaluated based on current flood maps, not the flood maps that existed the year the building was constructed. This means that buildings in areas that are now considered to be at risk for floods will probably see a dramatic increase in their flood insurance rates.
Thankfully, this change should only truly affects older homes, and homes built in the last decade or two shouldn’t notice much of a change when flood maps are reevaluated.
If you have questions about your flood insurance policy, remember that Vargas and Vargas Insurance is always here to answer your questions. We have offered flood insurance to our Massachusetts clients for many years, and we can help you determine how all this new legislation will affect you and your home.
We encourage all home and business owners to call 877-550-0025 today to speak to an insurance specialist from Vargas and Vargas Insurance about your flood protection. We will evaluate the effects of the Biggert-Waters Flood Insurance Reform Act on your property, and may also be able to save you some money on your flood insurance premiums!