Flood Insurance Update – April 2015

Flood Insurance Update - April 2015Periodically FEMA will make adjustments to the National Flood Insurance Program, or NFIP, that affect the cost and policy features of policies available to homeowners.  NFIP recently announced changes that will affect the Sacramento area, primarily Natomas.  I will summarize the changes below as succinctly as possible, but you can always contact us for specific questions.
April 2015 Changes
The Preferred Risk Policy, or PRP, is the lowest cost policy that bundles coverage for both the home and the owners’ contents.  It is primarily available in the low-risk areas, but a special extension was granted for Natomas, and then that extension was renewed several times.  The PRP Extension is still available in Natomas but we are warned that it will not be for long (see Summer 2015 changes below).  PRP Extension deductibles will be increased from $1,000 to $1,250 on the policy renewal date.
One significant change is to the price of flood insurance for tenant-occupied homes.  Those properties will be allowed to buy the PRP, where available, but will be charged a $225 surcharge.  Current rates for the PRP are $470 (owner occupied) and $695 (rental property).
Summer 2015
In June or July of 2015 Natomas will be remapped from Zone AE to Zone A99.  This change will remove the requirement for an Elevation Certificate (hooray!!).  It will also make it possible for development in Natomas to begin again, as well as remove that ridiculous restriction against rebuilding homes that have burned down.
October 2016
First of all, that’s 2016, not 2015. NFIP is estimating that on 10/1/16 the PRP Extension will be removed.  For current policyholders affected by this change, their rates will change on their renewal date after the change takes place (again, estimated to be 10/1/16).  In today’s pricing the PRP costs $470. When the Extension is removed and the PRP is unavailable, a new Standard policy with the same coverage would cost $1,957.  There are 2 ways to reduce that price shock.  First, eliminate the coverage for contents.   Next, increase the deductible.  In today’s rates, a policy with $250,000 coverage for the dwelling, no contents coverage and a $5,000 Deductible, the price would be $979.00.  So as a ballpark figure, you can say that your flood premium will be doubling in 2016 and you will lose coverage for contents at the same time.
How does this affect Home Buyers and Realtors today?
It affects home buyers most quickly if they are buying rental properties.  But primary home buyers will also need to know what they are getting themselves into.  They may be able to afford a $470 premium today and not $1,000 a year from now.  This is also where agents need to be careful.  A wise agent will disclose this information, even though FEMA and NFIP are only giving us estimated dates at this time.  Better safe than sorry, as always, plus it’s the right way to do business.  Nobody likes those kinds of surprises.
As always, we are very happy to answer questions about specific insurance policies or addresses.  The flood maps are very much like jigsaw puzzles, so it is always best to look at the rates for specific properties when your buyers are getting serious about getting into contract on a home. Please contact us any time, or have your client give us a call.