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Deal Reached to Delay Biggert Waters
Well, this is somewhat good news. It gives some relief to people who bought after July 2012, and people who already had grandfathered policies. Business property owners and second homes seem to still be in the line of fire.
http://www.insurancejournal.com/news/national/2013/10/28/309383.htm
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13 Replies
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Why is it good news? If someone buys property in an area prone to flooding, shouldn’t they have to pay for the risk instead of the government forcing the rest of the taxpayers to subsidize their gamble?
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It’s not gambling. New houses have to be built to the latest code, and will get a reasonable rate. It’s mostly the older houses (pre 1970s), which were built before there was a code, which are getting absurd flood insurance rates that very few people can afford. The highest I personally heard was $52K/year for a $300K home built in 1977.
I think we both know, and DC just figured out, that older homes are not going to magically update their design and levitate themselves above the BFE because congress passed a law, or FEMA changed the Map.
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If one buys a house in a valley and is surprised that water flows there, one did not think things through! I have never understood why people buy houses in flood prone areas. Most of them did because they wanted to be near water or the land was cheap. There is always a trade off. I don’t feel as a taxpayer I should pay for their gamble or mistakes. It doesn’t mater what year it was built, if you look around and you are downhill from the area around you; you may flood. I know some areas where it is not as obvious that it may flood just by looking around, but there are plenty of places that are obvious that it won’t flood! That’s where you build, unless you have the money to replace what you build when it floods, because it will flood if you are downhill.
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Well should I be paying for the tornadoes that occur in Tornado alley?
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Well, let’s look at some real numbers.
Over the last 35 years, Florida, with all our “near-the-water homes” have paid over 4X more into FEMA than they have received. It’s $16B paid in, verse $3.7B received. There are many coastal states that have similar stats. So please, don’t complain about the coastal communities, when they occasionally need federal help, because they have been bailing out the rest of the country for the last 35 years … and in light of that vast overpayment, all the uproar over “the grandfather clause” for older homes seems to be not so much based in reality. We are vastly overpaying, even with the lower Pre-FIRM and Grandfather rates.
Maybe FEMA should not allow money to cross state lines, and give people a discount based on how much is in their state’s coffer. Sounds like flood insurance rates in Florida are already about 4X too high, and should be going down, rather than up.
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The fact remains that the trest of us should not be subsidising your flood insurance premiums. Insurance exists to spread the risk amongst the ratepayers, not to bank payments for some unforseen event.
As Katrina and Sandy have shown, one event can deplete the resereves, and then what. Your state reserve could be depleted and then you cannot collect on your policy. How does that work?
If you get Federal flood insurance you should pay market rates for your coverage and not seek others not in the program to foot your bills.
Do you really believe that there is a taste to provide huge sums for natural disasters after what Sandy has cost? -
> Insurance exists to spread the risk amongst the ratepayers, not to bank payments for some unforseen event.
Well, sort of. The premiums are spread both laterally (among ratepayers) and temporally (along a time span) to meet the actuarial analysis of risk magnitude and frequency. So yes, the insurance companies don’t bother with unforeseen events, but they do bank present payments against future payouts for predicted events.
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I’ll put it simple. I believe that if you followed the rules and regulations that were in effect at the time the house was built, then you should be locked in at an “in compliance” rate, regardless of what the bureaucrats do in the future to modify the maps, building codes, and policies. Houses are permanent structures, not something that can be easily modified every time FEMA or the government changes their minds. It really doesn’t make sense to ever buy or build a house when an unknown law change / Map Change / Policy change in the future could make your house unaffordable AND unsellable (even if you exceeded the building code at the time), which is exactly what Biggert Waters would have done to a lot of people.
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So we should subsidize these homes and their owners forever because they cannot afford to insure their property?
Let me make something real simple, I don’t think so.
This was a big Tea Party issue about limiting government in our lives.
When this bill to the House floor be ready to hear what you fear.
There was little taste in the House for bailouts after Sandy. Everyone wants to protect their own when they are not paying the tab, but not when it is their neighbor.y -
I don’t know why you think this will be some hotly contested and politically polarizing issue. Thankfully, many politicians, on both sides of isle, seem to have come to the conclusion that taking a small percentage of homeowners who are required by law to maintain flood insurance, then jacking their rates up to 100X more than the national average, will result in way too much hardship and wealth destruction than people should be asked to bare. It will literally bankrupt people, force businesses to close, and make entire communities fail, while probably forcing 100s of thousands of people to walk away from their mortgages and causing a second housing/financial crisis. In other words, it’s a bad policy that wasn’t thought out very well. Politicians have realized this, and are now scrambling to keep the NFIP affordable. You’ll find involvement in the proposed delay from both sides of the isle, including Tea Party Favs like Sen. Marco Rubio leading the charge.
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To me it makes no sense to charge someone $20,000 a year, which I’m sure is a very small number compared to the total of the flood policy’s out there, for a policy that has a max of $250,000.
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Joe
But does that reflect the true rates these owners should be paying. It is all about risk. The flood program began because no one would write coverage for these homes built in flood prone areas. The problem has become continuing to build in these areas and expecting someone else to provide coverage, even mediocre coverage, because of the risk.
The taxpayers have assumed the risk by subsidizing the premiums and now when the attempt is made to balance the costs to the taxpayers no one wants to pay.
Look at the prime sponsors of this bill. All coastal states like LA and NJ. It is their vested interest to get subsidies. -
Chuck & Kevin
I am totally with you. I live in a beachfront community in northern Massachusetts. We have had several houses wash away due to beach erosion. In fact one of the houses belongs to friends of ours and we have had dinner there enjoying the ocean. All I see in the local newspaper and hear at the coffee shop are oooo… the poor Jones’ they are lost their house….bullcrap. Their family enjoyed it for 75 years. It has nothing to do with me. When they start paying my homeowner’s insurance I’ll feel obligated to pay their flood insurance.
Major
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