People rebuilding after flooding last year, as well as those who dodged the disaster, will face steep increases in flood insurance premiums under changes to the National Flood Insurance Program.
Significant reforms made to the program through the Biggert-Waters Flood Insurance Reform Act of 2012 will raise premiums by 25 percent each year until they reflect “the full risk rate,” according to the Federal Emergency Management Agency.
Changes will begin Jan. 1 for those with non-primary residences that have flood insurance. Other properties, including businesses, that have been damaged or substantially improved will begin seeing increases in premiums later in 2013, according to FEMA.
• Find more information at www.fema.gov/national-flood-insurance-program
Changes to the program will also eliminate grandfathered rates and any subsidies that currently exist within special flood hazard areas.
Other factors that will cause premiums to spike include a change of ownership, a lapse in insurance coverage and the issuance of new or revised flood insurance rate maps.
Most flood maps haven’t changed in 25 years, and new rates will reflect updated risks, said Dan Corbin, director of research for the Professional Insurance Agents Association, a trade association representing professional independent property and casualty insurance agents.
“There’s been a concern over a number of years that the rates being charged are not enough to compensate for the risk. This is really a painful correction to a problem that has existed for a while,” Corbin said.
New flood risk maps, as they’re completed, are likely to expand flood zones to include some higher elevations that weren’t considered flood-prone 25 years ago.
“Elevations that once were considered adequate aren’t adequate anymore,” Corbin said.
For insurance agents, the hike in premiums will complicate the already difficult task of selling flood insurance. Corbin said insurance agencies looking to provide adequate coverage for their customers in the past had a difficult time convincing them they should get flood insurance.
“Now it’s going to be an even harder sell,” he said.
Flood insurance premiums vary significantly, depending on property value, specific risk factors and location. Corbin said people in flood hazard areas such as on Long Island are paying an average of about $3,500 a year for flood insurance.
“That’s going to go up quite a bit, probably double, unless people do something to mitigate their risk by raising their home,” he said.
No specific average flood insurance premium in the Capital Region was immediately available Friday.
FEMA literature outlining the changes suggests different ways property owners can minimize as much as possible the cost of their flood insurance. One step is critical at a time of post-flood rebuilding, such as the work ongoing in the Schoharie and Mohawk valleys following Tropical Storm Irene: elevating the home well above current flood elevation levels.
Under FEMA’s example, a $250,000 home within a moderate- to high-risk zone that sits four feet below the base flood elevation pays $9,500 a year for flood insurance.
Raising the home to sit at the base flood elevation would lower that premium to $1,410 per year, while raising it three feet or more above base flood elevation would cut the premium to about $427, according to FEMA.
Another option that could help people in flood-prone areas get discounts on their flood insurance is the Community Rating System program. Municipalities participating in this program have to implement steps to minimize flood threats to their communities. Full compliance can yield a discount on residents’ flood insurance premiums of as much as 45 percent.
Under this program, municipalities earn credits for achieving goals in four categories: public information, mapping and regulations, flood damage reduction, and flood preparedness. Activities that earn credits including making flood insurance rate map information available, sending out information about flood hazards and protection measures, and developing regulations requiring notification to potential buyers that properties are in a flood-prone area. Others include establishing regulations to protect critical facilities, and updating flood hazard mitigation plans.
Currently, however, there are only 39 municipalities in New York state that are participating in the Community Rating System program. The town of Esperance in Schoharie County is the only Capital Region municipality involved in the program, and that participation currently yields only a 5 percent cut in flood insurance rates, according to the FEMA website.