Flood insurance covers a risk that homeowners insurance policies typically do not insure. While flood coverage comes at an additional cost, it can be highly valuable. Residents of areas hit by natural disasters such as hurricanes can attest to that.
Flood insurance policyholders may have noticed premium changes beginning in April 2017. Let's take a look at flood insurance costs and what policies may be most affected.
Premium increases stem from federal legislation
The National Flood Insurance Program (NFIP), an initiative of the Federal Emergency Management Agency (FEMA), provides many flood insurance policies in the U.S. through insurance companies such as Selective. FEMA mandated that premiums for flood insurance policies increase by an average of 6.3% starting in April 2017.
This increase in flood insurance premiums was a result of the Biggert-Waters Flood Insurance Reform Act of 2012 and the Homeowner Flood Insurance Affordability Act of 2014 (HFIAA).
This increase could have been considerably greater. According to The New York Times, the 2014 HFIAA legislation called for increases in flood insurance premiums to be gradually implemented over time, rather than all at once. That law moderated the requirements of the Biggert-Waters 2012 legislation, noted The New York Times, which would have brought annual premiums up more rapidly in an attempt to make premiums more in line with the actual flood risk.
The average annual premium was $878 after the April 2017 changes, up from $827, reported FEMA.
Properties most affected by increases
Generally, customers with flood insurance are experiencing the highest increases if they own:
These increases affect flood insurance policies until their premiums reach “full-risk rates,” according to NFIP.
NFIP guidelines set a cap on how much flood insurance premiums can rise in any year. With the exception of the above-mentioned high-risk properties (which can have their flood coverage annual premiums rise by up to 25%), no single policy can go up by more than 18% per year until full-risk rates are achieved.
The premiums paid for policyholders are set based on their property’s location on NFIP’s Flood Insurance Rate Map (FIRM). A “FIRM” is NFIP’s “official map of a community on which FEMA has delineated both the special hazard areas and the risk premium zones applicable to the community.”
If you have questions about flood insurance, contact your independent agent or find a Selective agent.
Flood insurance policyholders may have noticed premium changes beginning in April 2017. Let's take a look at flood insurance costs and what policies may be most affected.
Premium increases stem from federal legislation
The National Flood Insurance Program (NFIP), an initiative of the Federal Emergency Management Agency (FEMA), provides many flood insurance policies in the U.S. through insurance companies such as Selective. FEMA mandated that premiums for flood insurance policies increase by an average of 6.3% starting in April 2017.
This increase in flood insurance premiums was a result of the Biggert-Waters Flood Insurance Reform Act of 2012 and the Homeowner Flood Insurance Affordability Act of 2014 (HFIAA).
This increase could have been considerably greater. According to The New York Times, the 2014 HFIAA legislation called for increases in flood insurance premiums to be gradually implemented over time, rather than all at once. That law moderated the requirements of the Biggert-Waters 2012 legislation, noted The New York Times, which would have brought annual premiums up more rapidly in an attempt to make premiums more in line with the actual flood risk.
The average annual premium was $878 after the April 2017 changes, up from $827, reported FEMA.
Properties most affected by increases
Generally, customers with flood insurance are experiencing the highest increases if they own:
- Properties that meet NFIP’s “Severe Repetitive Loss” definition (meaning properties with four or more flood insurance claims of $5,000 each and $20,000 total, or with two or more claims that totaled more than the building’s fair market value).
- Business properties.
- Secondary homes.
These increases affect flood insurance policies until their premiums reach “full-risk rates,” according to NFIP.
NFIP guidelines set a cap on how much flood insurance premiums can rise in any year. With the exception of the above-mentioned high-risk properties (which can have their flood coverage annual premiums rise by up to 25%), no single policy can go up by more than 18% per year until full-risk rates are achieved.
The premiums paid for policyholders are set based on their property’s location on NFIP’s Flood Insurance Rate Map (FIRM). A “FIRM” is NFIP’s “official map of a community on which FEMA has delineated both the special hazard areas and the risk premium zones applicable to the community.”
If you have questions about flood insurance, contact your independent agent or find a Selective agent.
