Flood in Your House, Flood on the Brain

By Megan Cooney, Marketing Assistant

As of October 2013, many aspects of the Biggert-Waters Flood Insurance Reform Act of 2012 (BW12) are being put into effect. The reform has many homeowners struggling to understand how it will affect them. The bottom line is this. The rates for flood insurance are dramatically increasing, and many homeowners who may not have been considered to be living in a flood zone before the reform are being remapped into one.

Flood insurance is a separate policy. This coverage can only be purchased directly through the Federal Emergency Management Agency (FEMA), or private insurance agents. Yet, the flood insurance rates are being set by the National Flood Insurance Program (NFIP), a federal government program. This means that flood coverage premiums will not vary, no matter which insurance agent or company is used.

NFIP determines these rates based on several factors, including the date and type of construction of the home and the risk level of the area occupied. Beginning January 2013, homeowners with existing flood coverage could see a 25 percent increase per year over a four to six year period until a fixed rate is determined. This will most likely result in a hefty price for flood insurance, one that must be paid in full to NFIP. If you carry a mortgage on your house, FEMA will require your mortgage holder to escrow the premium.

Although flood insurance is not federally required of every home, it is an investment the government strongly recommends, especially when living in a high-risk flood area or a moderate-to-low risk flood area. Homes and businesses that are in high-risk flood zones and have mortgages are required to purchase flood insurance. The property must be resided in for at least 292 days out of the year otherwise, it will not qualify for primary care flood coverage.

Elevation certifications are becoming key to flood insurance. This certificate is measured by how far your property is from the flood level. Obtaining this document will help decrease flood insurance rates, and could be a substantial savings. An elevation certificate alone costs around $800, a fee paid by the homeowner.

With flood, it is better to be safe than sorry. However, there are circumstances when having flood insurance is not beneficial for the consumer. In order for a homeowner to be able to submit a flood claim, the damage needs to extend to either two properties or two acres worth of land. So, if your house happened to be the only property to suffer flood damage, a claim may not be able to be made.

Be sure to talk with your agent to better assess the type of flood coverage needed for the specific flood zone you live in.

*This article is written for informational purposes only and should not be construed as providing legal advice.