In 2014 the Homeowner Flood Insurance Affordability Act of 2014 (HFIAA) became law.  FEMA is still working on implementing the changes to the NFIP and flood insurance rates across the country.  What does that mean for homeowners? 

Rate Increases

Before the first Flood Insurance Rate Map (also known as pre-FIRM properties) became effective homes and businesses were likely to qualify for subsidized rates.  With both the Biggert-Walters and HFIAA the subsidies will eventually be eliminated. 

FEMA will gradually phase out subsidies as follows:

  • Subsidized rates for pre-FIRM primary residences in SFHAs will increase by 18% a year until reaching full-risk rates.

  • Pre-FIRM subsidized rates for non-primary residences in SFHAs (and Zone D) will increase by 25% each year until reaching full-risk rates.

  • Pre-FIRM subsidized rates for business properties will increase by 25% each year until reaching full-risk rates, starting as soon as FEMA can distinguish businesses from other properties currently grouped as non-residential. Until then, pre-FIRM non-residential properties, including businesses, will increase by approximately 18%each year.

  • All other pre-FIRM subsidized rates will increase by no more than 18% each

New Policy Surcharge

During the development of HFIAA, Congress had to balance rate rollbacks and refunds with positive income by adding a surcharge for all flood insurance policyholders. That means beginning April 1, primary residents will pay an annual surcharge of $25 regardless of flood zone; all other buildings, including secondary homes, businesses, condos and more, will pay an annual surcharge of $250.  And the surcharge will apply annually until there are no more subsidized rates in the program.

According to Bruce Bender, specialist in outreach and risk communication services and a national consultant for FEMA’s FloodSmart marketing campaign and FEMA’s Risk MAP effort, his biggest concern is for policyholders who are not located in high-risk areas and aren’t required to purchase flood insurance, but still opt to purchase a Preferred Risk Policy. For $200,000 in building and $80,000 contents, those customers would pay a premium of $390 to protect a secondary home.

But “this year, that renews at $630,” Bender says. “That’s a 62% increase. So if the bank’s not requiring you to buy flood insurance, are you going to keep it? This surcharge that allows people to keep their pre-FIRM subsidized rates longer is now causing another subsidy of its own and impacts all policyholders.”

Higher Deductable Option

HFIAA also adds a $10,000 deductible option for all residential property owners, including single-family and two-to-four family dwellings and this new deductible amount applies to both building and contents coverage.

That results in a 40% discount,” Bender adds. “If there’s a lender involved, typically the lender will probably have to approve such a high deductible. But you combine that with community rating system discounts, and it could help.”

For more information on the changes in flood insurance

See the article “Brace Your Clients for New Flood Policy Srucharge” in Iamagazine  http://www.iamagazine.com/markets/read/2015/03/30/brace-your-clients-for-new-flood-policy-surcharge#sthash.yt6l6lxq.dpuf

National Flood Insurance Program (NFIP) Manual  https://www.fema.gov/media-library/assets/documents/103209  


“Upcoming NFIP Changes: Are Your Clients Prepared?” by Floodsmart. http://www.iamagazine.com/news/read/2015/03/04/upcoming-nfip-changes-are-your-clients-prepared

We are prepared for your questions about the changes in your flood insurance and welcome you call.  Please take a moment to allow us to clarify the changes and how they could effect your flood insurance.

Dean & Draper is a Trusted Choice insurance agency representing over 200 insurance companies. For over 35 years we have offered a trusted freedom of choice to our clients.  ContactUs.