When Hurricane Sandy slammed into the east coast in October 2012, few could have predicted the massive devastation. New York City saw a record storm surge of water and widespread flooding. Over 7.5 million businesses and households in fifteen states and the District of Columbia were plunged into darkness without electricity. Kinetic Analysis Corporation estimated the overall economic impact from Sandy could be as high as $25 billion.
Something else nobody counted on was the prolonged recovery effort. Over a year and a half after the storm, many of the Army Corps of Engineers’ plans to build or improve levee systems and other flood control devices have languished in political and financial limbo. FEMA has been slow to complete post-Sandy modifications to flood maps in many areas. In areas where flood maps have changed, many homeowners have suddenly found their property included in a higher-risk flood area, sending their flood insurance premiums through the roof. And many homeowners are still struggling with unresolved flood insurance claims.
A ray of sunshine
Recent changes in the National Flood Insurance Program (NFIP) are offering at least some temporary relief for many homeowners. In March, President Obama signed into law the Homeowner Flood Insurance Affordability Act of 2014. This law repeals and modifies parts of the Biggert-Waters legislation of 2012, which was intended to do away with flood insurance subsidies and discounts.
The 2012 law led to frightening hikes in flood insurance premiums for tens of thousands of homeowners, leaving many unable to afford the coverage and faced with selling or foreclosing on their property. In many cases, homeowners living in areas that had never flooded were suddenly facing huge premium increases. The 2014 law requires gradual rate increases to properties that have been receiving artificially low or subsidized rates, instead of the immediate increases to full-risk rates that caused widespread sticker shock and panic.
Bottom line: If you live in a flood zone, your flood insurance premiums will be going up, but not all at once.
For those who currently have policies with subsidies or discounts, those perks will be phased out over the coming years. Premiums for most subsidized properties are required to be increased by no less than 5 to 15 percent and no more than 18 percent annually until the premium reaches full-risk rate.
It’s all in the map
How will changes in the law affect your premiums? That depends on your risk, and you’ll want to keep an eye on FEMA’s changes to flood maps. If your property is mapped out of a high-risk area, your flood insurance premiums will likely go down. If you've been mapped into a high-risk area, you’ll be required to purchase flood insurance if your mortgage is through a federally regulated or insured lender.
If the new map puts you in a flood zone, do you have options?
Yes. If your property was newly mapped into a high-risk flood zone on or after October 1, 2008, you could be eligible for the lower-cost Preferred Risk Policy (PRP) under the National Flood Insurance Program. To be eligible, your property has to meet certain loss history criteria. If you feel your property has been inadvertently mapped in a flood zone, you can submit a request to FEMA for a Letter of Map Change (LOMC).
If you need help navigating the flood insurance maze, talk to the New York business insurance experts at BNC Insurance and Risk Advisors.