Across the country, flood insurance policyholders (and their wallets) are feeling the impact of the changes mandated by the Homeowner Flood Insurance Affordability Act of 2014 (HFIAA). The law, passed by President Obama in March of 2014, went into effect April 1, 2015 as a way to slow some flood rate increases, as well as offer relief to certain policyholders who experienced significant premium increases caused by the Biggert-Waters Flood Insurance Reform Act of 2012 (BW12).
The Federal Emergency Management Agency (FEMA) states that policyholders can expect to see “an increase in the Reserve Fund Assessment, the implementation of an annual surcharge on all new and renewed policies, an additional deductible option, an increase in the Federal Policy Fee, and rate increases for most policies.”
While these changes are being implemented, the National Flood Insurance Program (NFIP) advises policyholders to maintain their flood policies, otherwise a lapse in coverage could leave them unprotected. Here are some of the highlights of the changes:
New surcharge. To compensate for a decrease in revenue, an annual surcharge has been added onto all new and renewed flood policies, regardless of flood zone. Primary homes will pay a $25 surcharge, while all other policies will pay a $250 surcharge, including businesses, secondary homes, and multi-family homes.
Deductible option. The maximum deductible for a flood policy has been increased to $10,000 for all residential property owners, including single-family and two-to-four-family dwellings. This deductible will apply separately to building and contents coverage. For single-family homes that elect to have the maximum deductible applied to their premium, it will result in up to a 40% discount, according to FEMA. However, keep in mind that if you have a mortgage, your lender will need to approve the high deductible first.
Rate increases. Both the Reserve Fund Assessment and the Federal Policy Fee will increase, and neither fee will be calculated into your premium total. HFIAA limits the average annual increase in flood premiums to 15% for each risk class. Additionally, the most any individual premium will increase is 18%, with a few limited exceptions that will be increasing to 25% (misratings, increases in the amount of insurance coverage, and premiums on some categories of subsidized pre-FIRM policies). Certain subsidized policies (non-primary residence, severe repetitive loss properties, and substantially improved properties) will see a 25% increase, as mandated by BW12. Business properties will also see a premium increase of 25% within the coming year. These increases will continue until premiums reflect the true flood risk of property owners.
If you have questions or concerns about how the changes mandated by HFIAA will affect your flood insurance policy, contact McGrath Insurance Group at 800-342-3859 or www.mcgrathinsurance.com.
*This article is written for informational purposes only and should not be construed as providing legal advice.