Exclusively from Foa & Son
Floods remain a persistent concern, as is evident from news reports, and with unpredictable weather patterns that seem to have become an ever present fact of life that shows no signs of changing.
The Biggert-Waters Flood Insurance Reform Act was enacted in 2012, before storm Sandy hit the Eastern Seaboard. It reauthorized the National Flood Insurance Program (NFIP) for five years but, in view of the fact that cumulative losses in the NFIP had ballooned to some $24 billion, the act also included other changes to address structural problems in the program that led to the deficit. Most significantly, it requires that insurance premiums for property owners in flood prone areas be set at a level that better reflects the full actuarial risk of flooding in a specific area. The government is also updating and redrawing flood-zone maps that will classify more properties as flood risks. Companies and individuals who own properties that lie in flood-prone areas have long enjoyed access to government subsidized flood insurance, but that’s now changing. Owners of structures built before the release of the first federal flood maps and owners of grandfathered properties that either met flood guidelines when they were built, or have since been determined to be in a flood zone, are affected the most. The new law also eliminates an exemption that used to apply to buildings that were built to comply with previous building codes and flood zone elevations.
Owners of such properties, along with those that for the first time may now find themselves within the borders of newly expanded flood zones, may face uncomfortable choices. Federally subsidized flood insurance is going away. They must now either retrofit their homes or businesses by raising their buildings higher so they are above flood level and take other measures to better guard against flooding, or pay new flood insurance rates that could surge by more than $10,000, and higher, annually.
The most immediate and dramatic impact of this law is being felt initially in coastal areas, since that is where FEMA has gone first to redraw flood maps. As FEMA gets around to updating maps in other areas the effect will eventually be felt throughout the country. If you own a property in a current flood zone, expect changes, but even if you are not currently in a flood zone, stay alert. Many of the new flood maps are expanding flood zones to encompass areas not formerly considered flood prone.
Owners of properties affected by these changes are faced with some tough decisions. If you own your building outright you can decide how you want to react, but if your property is encumbered with a mortgage your options may be more limited. Lenders are keenly aware of these changes, and already typically require flood insurance for any property in which they have an interest which lies in a flood zone.