Flood Insurance Changes Effective 10/1/2013
On 10/1/2013 the National Flood Insurance Program (NFIP) introduced changes to their pricing methodology. These changes are a result of the Bigger-Waters Flood Insurance Reform Act of 2012, which extended the NFIP for 5 years. Biggert-Waters’ primary goal was to make the NFIP financially viable, since the program is currently about $20B in debt. In order to accomplish financial viability, the new law will require that flood rates accurately reflect the flood risk of the specific property. Imagine that! The rates will actually be based on the risk of flood to each specific property! This means that if you’re in a higher-risk area, you can expect rates to rise dramatically.
Examples of Rate Changes in the Sacramento Region
Preferred Risk Policy (PRP) Extension rates have increased from $412/yr to $489/yr. These rates will continue to increase by 20% per year for the next 4 years.
Pre-FIRM structures (approx. 1980, but call us to check) will no longer receive subsidized rates. Current owners of pre-FIRM structures will see their flood insurance rates increase by 25% per year until they reach the actuarially calculated rate. In order to calculate this rate the property owner will be required to provide their carrier with documentation including an elevation certificate.
Heads Up, Home Buyers and Realtors
The biggest issue we’ve seen so far has been with pre-FIRM structures (i.e. older homes) located in special flood hazard areas (SFHAs) where a base flood elevation (BFE) has not yet been determined. Without having a BFE to compare the elevation certificate to it can be difficult to determine the flood insurance rate. In this situation the policy will typically need to be manually rated by the flood insurance company. With all of the recent changes this process, which used to take 4 hours, can take up to 4 days. These kinds of waits are not the norm, but if you are buying a home and don’t check into flood insurance until the last minute you could hurt your loan lock or other home-purchase contract items.
Elevation certificates will be required in order to provide flood insurance for newly purchased pre-FIRM structures in SFHAs. These certificates can cost between $300 and $500, and can also take a few days to generate. With the demand for certificates increasing, you can expect it to take even longer to get a certificate.
Conclusion
Flood insurance is one of the simplest insurance policies that you will ever buy. But the process of buying it has just become very complex for some homes. You need an insurance agent who can help you navigate the complexities of FIRM dates, flood zones, communities, BFE’s & SHFA’s, not to mention elevation certificates. Call Purves Insurance today at (530) 756-5561, or visit our website, and let us take care of it for you.
