On October 1, flood insurance rate increases become effective for some homeowners as a result of the Biggert-Waters Flood Insurance Reform Act of 2012. The goal of the reform is to provide financial relief to the National Flood Insurance Program, which has incurred astronomical debt as a result of recent major flooding around the country.
What you need to know
The Act will eliminate government subsidies and could cause significant premium rate increases. However, not all policies will be impacted. Here’s what you need to know:
- Only 20% of NFIP policies are currently subsidized.
- Not all subsidized policies will see rate increases.
- About 5% of subsidized policyholders, including non-primary residences, businesses, and properties that have experienced sever repetitive loss will see immediate increases at 25% annually.
- The 80% of non-subsidized policy holders may see smaller increases of 5% to cover a Reserve Fund assessment.
- The changes effect new and lapsed policies, as well as some homes according to Base Flood Elevation (BFE) guidelines.
- Rate change will effect properties according to how they are situated in relation to the BFE, which projects how high water will rise during a flood.
- Traditional homeowners’ insurance policies don’t cover flooding.
- Flood insurance does not offer comprehensive coverage.
- FEMA is updating flood maps which could force some businesses and homeowners to purchased flood insurance.
How to get more information
These changes could impact the decision to purchase or sell a home. To find out if the new changes will impact you, contact your insurance agent. You may also get information at FloodSmart.gov, TXChart.com, or by reading the Biggert-Waters Flood Insurance Reform Act of 2012.
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